But where this contingent of buyers will end up is anyone’s guess

Susan Pigg – Toronto Star

It’s likely to be 2016 before the bulk of echo boomers — who outnumber their baby boomer parents — start packing up their rented downtown condos and moving into the new and resale house market, says the Canada Mortgage and Housing Corporation.

Their impact is expected to be just as profound, if uncertain, as it’s been on the rental market where the desire among millenials to live close to work has driven up rents, driven down the vacancy rate and fuelled bidding wars for pricey new investor-owned condos clad in granite and stainless steel.

Comment: Slow down hoss, the downtown rentals are not all one demographic group. Many suburbanites are moving downtown, renting before buying to try it out. Immigration plays a huge part in the rental market. Students, you name it. And come on, I am even technically an echo boomer. My parents are right on the leading edge of the boomers, born in 1944 and 1945. I am 41 and bought my first home in 1999. Should I not be included in this group?

Echo boomers now account for half of Toronto’s population, but where they’ve going to end up as they move into parenthood remains the great unknown, according to the Toronto Housing Outlook Conference 2013, held here Tuesday.

Comment: Say what? We have 1.3 million children of boomers in Toronto? Unpossible. That would require the other half of the city to be their parents, which means 650,000 couples having 2 children each. With no one else, not a single other soul living in the 416. Methinks someone mistyped something a little bit there…

That’s because the average age of first-time buyers across the GTA is 37 — a number that’s remained surprisingly constant over the last decade as house prices have virtually doubled — and the bulk of millennials are just 20 to 36 right now.

Comment: Hard to compare what a 20-year-old will do and what a 36-year-old will do. When I was 20 I was in BC in university, with long hair and a wild streak. At 36 I was married with a child in Toronto. HUGE difference. And no, you can’t see pictures of me with long hair.

In 2012, echo boomers accounted for 15% of the growth in demand for housing across the GTA, but that’s expected to double to 30% by 2021, says CMHC regional economist Ted Tsiakopoulos.

Comment: Which makes sense. The 20-year-olds won’t have much of an impact, but once they get closer to 30, much more effect on the market.

CMHC officials have just begun analyzing 2011 Census data for the Toronto area that they hope, by next year, will give them a better understanding of where the wave of echo boomers is likely headed.

Traditionally, some 70% of tenants end up buying in the neighbourhood where they rent, the conference was told, so the surge of echo boomers now living in the core or along transit lines is seen as a trend that’s likely to continue.

Affordability, however, is likely to be the major barrier: The average price of a resale home in the GTA hit $539,058 in October, up 4.5% over a year earlier, according to the Toronto Real Estate Board.

In the City of Toronto, the average was closer to $594,000, although detached homes jumped a staggering 12.4%, year over year, to an average sale price of $873,509.

Those high costs are already driving construction of more affordable semi-detached, row and townhouses to cater to echo boomers looking to move up from condos, the conference heard.

Comment: That and there is little room to build new houses. Infill, sure, but they tend to be uber-luxe with price tags well above my pay grade.

But if just one thing remains clear, so far, it’s that millennials are likely to be renting a few more years, which should give the economy time to improve, and along with it their salaries and savings for downpayments, said Edward Heese, a senior market analyst with CMHC.

Comment: Say who now? The economy is doing awesome, thank you very much. Employment is up, in Toronto especially, as well as nationally. Look at all the building, both residential and commercial. You think that is a sign of a weak economy?

That should help the condo market continue to stabilize and boost demand for rental condos, with 50,000 new units now under construction across the GTA, many of them investor-owned, Heese added.

Comment: Continue to stabilize? It has never been unstable. Sure, it flows up and down, but that is not a sign of instability.

In fact, it’s largely because of those echo boomers, whose ranks have been bolstered by immigration over the last few years, that the downtown condo market, in particular, has held up much better than some observers had been predicting just over a year ago, he said.

Comment: Like I said above, there is more than one factor at play here.

While condo sales, and prices, softened last year, that market is “adjusting” because young buyers, and women, continue to see condos as an affordable entry point to the housing market, Heese told about 300 mortgage lenders, realtors, developers and planners attending the annual look-ahead by the federal housing corporation.

Comment: Everything softened next year, they strengthened up significantly this year. We all know what happened with the new mortgage rules.

As well, very few investors put their units up for sale as the market softened, largely because rents, and demand for rentals, remain so strong, he said.

Comment: The market never really softened, which is why they did not sell. That and they are in it to rent for the long term, not to flip out quick.

While the vacancy rate is expected to creep up slightly across the GTA in 2014, to 1.7%, and rental rate increases should ease somewhat, the rental market in the core is likely to remain tight. That’s because echo boomers and, to a growing extent their baby boomer parents, remain keen to live close to downtown jobs, restaurants and transit lines, said Heese.

CMHC predicts that housing price growth could actually slow to just 1.5% in 2014, while incomes should climb by about 2%.

That means, for the first time in years, incomes might actually grow faster than house price gains, another little plus for echo boomers counting their pennies.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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