Not that we’re planning on moving any time soon, but eventually Isaac will have a sibling, and we will outgrow our current apartment. And with the nutty state of real estate in Vancouver, thinking about this makes my head swim a little. Even though moving is far from imminent, I can’t not think about it now.
Photo by raysto
On one hand, it’s a place to live. Above all, it should feel safe & comfortable and be in an area we like living in.
On the other hand, it’s where a significant amount of our net worth is tied up, and losing much (any!) of that makes me feel all squeeby inside.
And none of the options I can think of sound particularly awesome.
Option 1: Wait until we truly feel we are out of space and need to move (dealing with cramped quarters until we found a new place), suck it up and swallow a potential loss (though values would have to plummet around 30% before we actually lost any money from where we initially bought) knowing that if the value of our place is down, the price of the place we’d be buying probably is as well. Try to stop thinking about it in the meantime.
Option 2: Start looking for a new place now, hope we can find a good deal, and start submitting offers subject to (among other things) sale of our existing apartment. Maybe we’d have an accepted offer and a new place in a year, but we’d spend a lot of time touring houses and having inspections done, etc. in the meantime.
Option 3: Sell, sell NOW and rent until prices go back down or we find a place to buy that’s a home we like at a price we can live with. This would likely be the best option to protect our current investment. I don’t actually mind the idea of renting, but I do mind the fact that houses are flipping so fast around these parts (as the last of the speculators try to get their money in and out) that it’s almost certain we’d be moving at least yearly until we decided to buy again. And of course renting is made even more difficult because we have a big dog. Kids and dogs: two big strikes against us as tenants, no matter how well-behaved either of them may be.
Option 3a: Find someone who’s interested in buying our place as an investment property, and rent it back from them for a year or more as a condition of the sale. At least it would shave one move off the experience.
And as much as I don’t want it to be an issue, it seems like having a kid (and someday kids) complicates the question of “where to live next?” Now, it’s not only a matter of finding adequate space suitable for us and the dog, along with our list of must-haves (laundry, dishwasher, balcony, nearby amenities). We also need to start thinking about things like play space, storage space (especially as we’re currently keeping Isaac’s baby things so we’ll have them around for eventual kid #2 – offsite storage is of course a possibility, but comes with a cost), outdoor space (either our own, or nearby parks & playgrounds), and schools.
I can’t be the only one thinking (obsessing) about all this. Gentle readers, what are you thinking about Vancouver real-estate these days? Or are you trying not to? Have I missed any bright, shining options or opportunities that you’re seeing? Commiserate with me.
I think Vancouver real estate is incredibly over-inflated and am fine with never owning. That said, I rent a place that’s kid / pet friendly, with outdoor space, room for 2 kids, near good schools, with landlords who don’t plan to sell, so I’m no help in the commiseration department.
It seems like there’s a fourth option:
Sell and live somewhere else
By “somewhere else”, I mean anywhere from a suburb to the Gulf Islands to, say, Mozambique.
I gather you probably want to stay in Vancouver, but that (very complicated) option is always on the table.
July 18th, 2011 at 5:01 pm
We certainly figure we’ll change neighbourhoods when it comes time to move, though it’s true these options all relate to staying in or very near to Vancouver.
Unless we want to change jobs. We haven’t ruled out moving “somewhere else” and are always interested in other opportunities like last summer’s ill-fated plan to move to the UK. And if that type of situation did come up again, we’d still be wrestling (as we were last summer) with selling and banking the money (and hoping it’d be enough to return to Vancouver someday), holding on to and renting out our existing place, or selling, using the money for various other things, and letting the other housing chips fall where they may.
Ugh, I hear ya. Our landlords are happy with us where we are for another year I would guess, but every time I look for new rentals I’m reminded over and over again how scarce 3 bedroom places are and that we won’t find much for cheaper than what we’re paying now. I can’t count how many times my in-laws have suggested Port Moody or how many times we’ve replied that we want to stay in Vancouver. I do know that a certain financial planner we both know highly encourages real estate owners to be following your option #3 right now.
Neighbourhood, schools, laundry, outdoor space, nearby amenities… all the things we want right now put us in the areas in Vancouver with the highest prices IN THE COUNTRY. My strategy for the time being is to try not to think about it, and dance and cheer every time the mainstream media picks up on the fact that Vancouver is in a huge bubble and in dire need of a “correction”.
Another line of thought I have is to sell all the non-essential STUFF we have and live a simple existence in a small home in our ideal location, rented or owned. I’d love for my kids to share a room, that’s no big deal. But the STUFF! Our “to-keep” pile always ends up just as big as before and for now it all gets packed back up in the attic.
Put it this way: would the closing and moving costs, and the mortgage penalty, be less than what you stand to gain from selling it, minus what you might lose if you hang on for a year? Then option 3a would be perfect if you could find the right buyer, and save you some moving money in the short-term, too.
But all the money articles I’m reading at the moment say that right now it is actually more expensive to own than to rent, so you likely won’t lose if you sell, and might even gain — IF you can find a nice place to rent.
July 18th, 2011 at 5:33 pm
I suppose this might change, since our mortgage is up for renewal at the end of the year, but right now it’s a secured line of credit, so no penalty for paying it off. And looking at rentals in the size we’d want in Vancouver neighbourhoods we’d like to live in (Kits, off Main, off Cambie), rents are about 30% more than our current mortgage payment – so after factoring in strata fees, maintenance a landlord would do and taxes, it’s nearly a wash. The fact that it’s so close makes it a much harder choice.
(It won’t let me reply, says “Can’t find the commenformid div”) 🙂
But! It’d be a wash for a bigger more appropriate place, right?
I live “somewhere else,” so no commiseration is available.
Ha! This issue can be debated until… well, it never ends. Here are my thoughts, but they come with a disclaimer… that is, they are MY thoughts, based on MY experiences and MY values. I have strong opinions on this issue, but I recognize that they are strong, and that other people have different ideas.
So, here it is:
1) Yes, the Van market is insane. I thought it was going to stabilize several years ago (note, not crash, but stabilize). Instead, it keeps climbing, relentlessly. Put it this way, your place (especially YOUR place) is not going to drop. It might not go up much more, but you are not going to lose money on it if you keep it for a bit. In fact, you are going to keep paying it down. So, option 3a doesn’t work (in my books).
2) Rent in Van is only going up. The rule for landlords is that rent can only be raised once a year by 4% if the same tenants are in (there is no limit when new tenants come in, but landlords have to be careful not to price out of the market). BUT, real estate prices have gone up by at least 12% a year for like 10 years. So, rent prices are, by default, behind mortgage costs, and landlords are now playing catch-up, and will be for a long time. So, right now you’re paying a lower mortgage than you would be if you were renting AND some of that $ is going toward paying down the principle. If you were to rent, ALL of your monthly payment (i.e., more than your current payment) is lost. So, option 3 is out. Oh, and if you’re up for refinancing now, you’re likely going to get a low rate… another thing in your favour. I’d just be careful not to lock into anything that is going to cost you to get out of (but, you can always transfer your mortgage if you buy again – no fee).
3) Re. option 2. I did this last year. In the end, it worked out, but there were 7 weeks in there that took about 7 years off of my life. BUT!!! I was selling a very, very different condo than yours. Ours was one of several identical units (although we had the added bonus of a great patio, which inevitably sold it) in a much less desirable location. Put it this way, if you found a place you loved, you would not have to put subject to sale. Your place would sell before the listing made it to MLS. Subject to sale offers simply do not fly in this market of multiple, cash, subject-free offers. So, you put in an offer with a long closing date, and you sell yours in the meantime. Trust me, I do not make this suggestion lightly. We almost lost our shirts. But, with your unit, in the location it’s in, I’d do it in a heartbeat.
4) I think with these things it’s really important to step back from the dollars for a bit. Think about what you really want, both in terms of space as well as peace of mind. Will you feel more mentally settled if you’re in a home that you feel you can really put down roots in? I know I do. Do you like your current home enough to stay for a bit? Or are you going nuts to get out? It’s easy, when you’re talking such big dollars, to get distracted by the potential gains and losses, but I think it’s worth it to examine the situation from all angles.
So, with that, I think an option 1/2 hybrid is the best bet. Try to chill out a bit (and I say that with true sympathy, coming from a chronic future-thinker) and enjoy that, for now, you’re fine. But, keep your eyes open. Get pre-approved, so you know your budget. It can’t hurt to tour some places to get familiar with the market. You’ll only be able to recognize your dream house (realistically speaking – i.e., the best option for you in your price range) if you’ve got a good handle of your market, and that can’t be done just browsing MLS. Then, if a place comes up that blows your mind, you’ll be prepared to act fast. I think it’s much better to make these decisions on your own time, rather than be forced into them because you’re desperate to move on.
Hehe… was that enough opinion for you?
A final note… like I mentioned, we were in a very similar situation to yours (albeit with a less valuable and less sell-able place on our hands) at this time last year. We found our dream home, jumped on it, throwing down the absolute maximum we could afford to beat out a competing offer, stressed (A LOT!) for 7 weeks waiting for our condo to sell, sold in a frantic state of craziness, taking a bit of a hit in the process, and moved. It was nuts, but I cannot even begin to tell you how much more content and peaceful I feel to be living in a place that I know I could be in for the rest of my life. I LOVE coming home every day and seeing MY home, where I will raise my family. And, it is also a bit of a bonus that I no longer give a shit what happens to the Van market. If it plummets, well, so be it. I wasn’t planning on moving anyway.
Good lord. I just realized that my comment is longer than your post. I think maybe it’s time for me to just start my own blog.
July 19th, 2011 at 2:55 pm
Thanks though, for the long comment! I totally suffer from being a chronic future-planner, so your point 4 was a good reminder that, since we’re not going anywhere yet, we should probably relax a bit about the whole thing. There will be plenty of time to stress out and panic when it is time to move in a year or two.
Sell it all, buy a boat and sail away (whatever your dream is – live it). If it fits, take a bit of your “retirement” now when you can enjoy it with the kids. Or, if finding your dream home and making it the place where you raise your family is your thing (see Nicole) then do that and don’t wait. The sooner you start living it the better. Forget what the FP says, they are quite simply wrong and are missing a huge part of the equation. There’s a chance that you actually enjoy the game of flipping homes and trying to maximize your real estate investment but then I don’t think that you’d have written this.
After experimenting with this (living the dream) for a year (almost) I have to say that the value gained from living your dream far, far outweighs any potential financial “loss”. Disclaimer: Carla doesn’t completely agree with me but we’re in agreement on the general idea 🙂
See you soon!
July 19th, 2011 at 3:00 pm
Yes, thanks. That’s actually a good reminder to just chill out about the whole thing. There are so many things we want to do eventually (see the world, on land and at sea!) that buying a “forever home” doesn’t factor into it yet. And to be fair, we don’t fall into the bucket of people that particular FP says should sell and get out (we don’t have a high-ratio mortgage, or more than half our net-worth in residential real-estate). It seems to come down to remembering that the place we live is a home, not a savings plan, and there’s so much more to it than the money we stand to gain or lose.
Just following up on my comment…
I’m pretty sure both of you are, as they say, “knowledge workers”, so the potential for you to work somewhere else in the world is pretty high.
I’m no expert, but I do know that Vancouver is one of the most desirable cities on the globe to live, so prices will always go up. Additionally, we’ll always be getting much less for our money here than somewhere else.
Our long-term (in proposal only, at the moment) solution to that problem is building a house on the slightly-less-expensive Gulf Islands, and then rent a little studio in Vancouver for the inevitable trips into the city.