Give Me Back My Five Bucks

Thoughts on our open house tour

Last weekend, our Realtor took us on an open house tour in our desired neighbourhood. We wanted to see in person what we could afford, and what we actually wanted in a future home. Because it’s fine to start jotting down a list of condo requirements, but it’s completely different to actually be in the space and figure out exactly what you want.

I mentioned on Twitter a few weeks ago that our mortgage broker said we’d be pre-approved for an $850k mortgage. We both have good jobs, no debt, and a nice down payment, but still I couldn’t help but be shocked. I thought it would be much lower considering I only got approved based on income from my full time job, and didn’t take into consideration my average freelance earnings over the last 3-4 years. In what world would anyone be able to pay a $3,700/month mortgage?

The rule of thumb is that the cost of a home should be no more than three times your gross household income – which would put us firmly in the $475-500k range, which felt a lot better.

So we settled on looking at places in the $400-500k range (which is just a step above entry-level in the Lower Mainland lol) and picked a list of places to look at.

The first Open House was for a 2 bed/2 bath condo listed at around $400k, and it absolutely shocked me. There were literally dozens (!!!) of people lined up to view it by the time we got there. No joke. They had to take people through in waves because we all couldn’t fit at the same time … and who knows how many saw it in the previous 2 hours of the Open House. After we saw it, my Realtor said the condo probably should have been listed at closer to $475k, and we found out later that it eventually sold for well over $500k. Okay… moving on.

After that one, we saw a mix of other condos – some in more “entry level” buildings, some that were used for rental income (one tenant just sat on the couch while we poked around … which was weird), a beautiful (but small) condo in a heritage building, and a nice warehouse conversion loft.

Here are some observations I took away from that day … most of them didn’t come as a huge shock, but it was interesting to see with my own eyes:

  • There were a lot of young people with their parents. I don’t know if it’s because their parents were co-signing, gifting money, or if they just wanted their parents along, but I was definitely surprised.
  • One of the listing Realtors commented that he was seeing a lot of activity from younger buyers because they’re wanting to take advantage of the BC Government’s Home Partnership program, which provides loans up to $37,500 (or up to 5% of the purchase price) which are interest-free and payment-free for the first 5 years.
  • Most listings were going to multiple offers.
  • Most listings were being sold above asking price.
  • Since most people are getting priced out of the detached housing market here in Vancouver and the surrounding area, that’s putting a lot of pressure and competition on the condo market.
  • Most condos seem to be selling within 7-10 days of being listed. FAST. Not at all like when I was buying my first home back in 2011.

Personally, I was a little turned off by how competitive the market is. I’m annoyed at how listings are purposely priced low in order to push the price tens of thousands of dollars above asking. I hate the idea of multiple offers and bidding wars. I hate how crowded and busy Open Houses are. And I hate that look of desperation I can see on the faces of prospective buyers.

But I also see how easily it can be to get carried away. Emotions get involved when it comes to buying a home, no matter how much you swear you’ll think and act logically … and when you’re faced with a decision to bid $5-10k more or risk losing your “dream home,” all of a sudden it doesn’t seem like such a big deal to slap some more debt onto your back … even though $5-10k could represent an entire year (or more) of savings.

I know that RD are lucky in that we can afford to buy exactly what we’re looking for, even in this over-heated market. But it doesn’t mean that we’re going to. Maybe we’ll end up buying this year, or maybe we’ll just keep watching the insanity from the sidelines.

Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


Comments

  1. Kay says:

    I can understand the bringing a parent along. If you are a first time home buyer and aren’t as knowledgeable about what things to look for in the place you want to buy (think things like water heater, a/c unit, etc) then having someone you trust with experience with you is beneficial.

  2. Jax says:

    That seems like a really stressful market to try to buy in. I wouldn’t want to feel pressured into buying because of the threat of other offers. Good luck navigating this market!

  3. Chelsea says:

    My husband and I are building in Burnaby and our mortgage will be over $3,700 per month when it’s done, but we make over 250k per year and look at this as an investment for our future as the land value has already doubled since purchase (not including the actual house). Being in the lower mainland we would rather invest in real estate rather than stocks, although we do have RRSP’s as well and keep a large cash reserve (200k+) for future real estate investments. It all depends on where you want to put your savings.

  4. SP says:

    I would probably have brought parents if they were local and interested, just because buying a house is something I have no experience with. Although they don’t have that much experience either!

    Hot markets are frustrating to buy in. It was similar for us a few years back (SF bay area), and I think it is only gotten worse – but we luckily weren’t in the very very hottest neighborhoods in this area. Still, 7-10 days on the market with 10-20% over list was the norm with multiple offers always. The norm is 1-2 weekends of open houses then “offers are due on Tuesday” after the open house. Pre-inspections were common (or forgoing inspection entirely!), but we lucky enough to be able to inspect after our offer and hold the contingency. Your patience will pay off, one way or another.

    It is weird how much banks will approve for – good for you for being more cautious and basing your budget off the reality that you want to live to.

    • Krystal Yee says:

      I guess the reason why I thought bringing parents was strange was because we weren’t looking at super entry-level places. Made me wonder if the parents were there to give support as well as financial help. And there’s nothing wrong with that, it just surprised me how many parents were there to view half million dollar condos with their children.

      Yeah SF bay area seems similar to Vancouver – everything going over asking, and generally sold after the first weekend of open houses. Also so many places are going in with subject-free offers, which is kind of insane when you think about it – I would have never considered that when I bought my home back in 2011, but it’s just common now.

  5. Song says:

    Vancouver housing market has been going insane for a while. After they introduced the new property tax policy, Seattle’s market is feeling the heat :( I think the housing market in Vancouver might cool down more with all the new introduction in policies and stuff so perhaps waiting is a good idea.

  6. Peter Leung says:

    Hi Krystal,

    I am in the same boat as you, but find this Vancouver housing market too crazy. Thanks for saying it out loud that bidding an extra $50K on a condo is total insanity; as it represents another year+ of savings. (well for a good saver like yourself)

    I am renting right now, and will continue to do so until this crazy housing market settles down.

    But I am interested in your opinion about how to approach this housing decision. If you and your partner eventually decides to buy, can you please post some of the reasoning here? I would like to use it as a source of reference for myself

    Thanks very much for posting this. At least this gives me comfort that there are others like me who are on the sideline for now

    Peter

  7. Joel says:

    Best part of your situation is you and RD are lucky your combined incomes can afford to buy exactly what you are looking for – even in an over-heated market – without harming your finances. Stay on the sidelines and continue accumulating wealth amidst the insanity. Time is on your side. You can afford to be selective.

  8. Joel says:

    Have you and RD considered buying NEW condos/houses on spec (as in specification), i.e., buying new condos/houses based on designs, model suites or show homes a couple months (or even years) before actual construction? Buying early (in Ontario) often costs less than buying after a project is completed. How are costs of new homes in B.C.? Are those prices more reasonable?

  9. Gigi says:

    It’s tough living in Vancouver. When my husband and I bought our first home, a condo, thirteen years ago, people (including ourselves) thought we were nuts for spending 307,000 for a two bedroom apartment in Yaletown. Now I look back and am thankful when I got in when I could because it helped get me into the house in the far ‘burbs and then to the house in the closer ‘burbs that I’m in today. Meanwhile, I’ve watched family and friends wait it out to the point that they are now priced out. I’m not encouraging you to buy (because it is crazy out there) nor am I saying sit back and wait. All I know is that prices are out of hand and the new BC Homeowner’s Grant is further fueling the exorbitant prices while putting young homeowners further into debt.

  10. Sarah says:

    Crystal I feel your pain. I am looking for a detached house in Maple Ridge/Pitt Meadows at the moment, and was just in a bidding war last night that I lost, while I did offer 15,000 grand over asking. It is so frustrating! It really makes me angry. The thing that comes to mind is I want to get into the market as soon as possible as you don’t know how prices are going to go for a year, two years or five years from now. I believe that fear is that fuels a lot of these irrational offers that we see. The BC Homeowner’s Grant is no help. It hurts us people that have saved up the down payment, now there is even more competition in the market with less supply. I still have no idea why the government would even bring that in, if you cannot save for a down payment you do not deserve a mortgage. I just get fired up writing this post. My plan of attack is to watch from the sidelines, which is really testing my patience. I know I do have to be fortune enough to have the ability to afford a home in this hot market, however it doesn’t make it any easier with all this competition. It is also sad when you compare where potential jobs are as well. In the marketing field as you are in too most if not all jobs are in the city. Getting a house as close to there as possible, is the challenge. The only affordable first starter homes for a family are Maple Ridge, maybe Langley, Aldergrove, Misson, Abbotsford and Chilliwack. The closest to transit is Maple Ridge, the other city’s are a big no, especially if you are in the same profession as you and I. Anyways that is my rant for now. Let the hunt continue and the best of luck Crystal. I look forward to reading your journey.

  11. JC says:

    We own a (very small) condo in Vancouver and will need to sell in the next couple of years for personal reasons. We bought it for pragmatic reasons, not as speculators or investors, and with an eye towards being able to lose the money if something truly crazy happened.

    We get regular “cold call” mail from realtors with crazy things on them about comparable sales and other listings. We’re also baffled by what very similar units by the same developer are selling for a few blocks away.

    It’s weird from all sides and it’s actually really uncomfortable to be holding the property right now because rather than being a conservative investment where every month the principle ticks down a bit as we enjoy living in a place we like (which is what we thought it would be), now there’s this question of whether we should be watching the market more closely or we’re foolish for not selling as soon as possible when we know we will need to sell in about two years. It’s hard to trust realtors or anyone with a vested interest.

    We spend way more time discussing property than I’d like as a result.

  12. StackingCash says:

    Sounds like Las Vegas in 2007. People had to wait in lines and draw lotteries for a chance to buy. Banks were, and still are,willing to loan money on just your word on how much money you make. Then the bubble burst…

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