Around the corner from where I live, a couple of houses are sinking. A subterranean creek runs underneath them, and gravity is unforgiving. They are attached to each other, and have fallen inward at the shared wall like a soufflé taken too soon from the oven. In the neighbourhood, they're known as "the crooked houses," though my kids prefer "the crazy houses."
They're on sale for $688,000 each. The absurd thing is when a neighbour told me the price, it didn't even seem that ridiculous. We are all frogs in the real estate pot, slowly boiling in our own madness. The average price for a semi-detached house in Toronto is $716,000, and people are willing to pay, even if the house in question looks like the Titanic after its unfortunate date with an iceberg.
The agent selling the houses was understandably a bit reluctant to speak ("there's been some negative publicity"), but, as Michael Palmieri noted, the sellers are simply responding to market forces and "it's an extremely strong market." The houses sit on a beautiful, friendly street with one of Toronto's great parks around the corner. They haven't sold yet, but Mr. Palmieri says there's "a lot" of interest.
The new owners will rip down the houses, hire a clever engineer, lay a new foundation (perhaps on a bed of their tears) and build something more valuable, because it is the dream of property owners that the ladder only ever goes in one direction. If they can get their feet on the lowest rung, that is.
No one needs to be reminded of the demented nature of the real estate market in prime urban centres. Every day brings a new report: The average price of a detached house in Greater Vancouver is now $1.4-million; in Toronto it's around $1-million. A modest bungalow in Vancouver sells for nearly $2.5-million and makes headlines. The website Workopolis calculated the annual income you'd need to buy a house in Canada's major cities: $147,000 in Vancouver, $113,000 in Toronto, a mere $75,000 in Ottawa.
In London, where I used to live, house prices in the centre of the city are now 25 times a typical annual salary. A garage sells for $500,000, because some day one very skinny person or two cardboard cut-outs might be able to live in it. A member of Parliament recently stood up to say that even young professionals are living "12 to a house" because they can't afford to rent in London, much less buy.
It used to be easy to tell the haves from the have-nots: The haves travelled in their own Pullman cars and wore live goldfinches in the birdcages braided in their hair. Now all you need is a mortgage and a Wolf range, and perhaps a good stereo system to drown out the teeth-gnashing of the have-nots.
The circle, of course, perpetuates itself. Talk to real estate agents and they'll tell you that the one thing that allows young buyers to get their foot on the first rung is financial assistance from their families. Earlier this year, The Globe reported that more than 25 per cent of Canadian first-time buyers used family help (the number was 35 per cent in Toronto and 40 per cent in Vancouver). What does this mean for people whose families don't happen to have that kind of money? "Hey, Dad, I know you're living hand-to-mouth, but could you spare $50,000 so I can buy this shack by the side of the highway?"
The other thing that allows young people to get into the game, if they choose, is steady employment. My own experience, though recent in geological terms, seems impossibly quaint. I got a full-time job at 22, with wages and pension negotiated by a union, and when I left that job nine years later I cashed out the pension. Together with my husband's savings, we were able to scrape together a down payment, and now we own a house – or, I should say, we own the cat flap and one downstairs closet door. The bank owns the rest. Just try saying "pension" and "full-time job with benefits" to someone under 30 – you might as well say, "Take the landau to the assembly rooms," for all the sense it would make.
Lots of people think that buying real estate in a precarious economy is a mug's game, that there are better ways to use your money, such as setting fire to it under a bridge. As my colleague Rob Carrick put it, "A buying frenzy right now seems detached from reality."
Yet, for reasons of heart more than head, as a culture we're invested in the idea of a single-family home, ridiculous though it may be. Pretty soon we may rethink this ideal, as our continental European cousins have, and free up a rental market, or become better savers, or invest in a stronger pension system, or learn to cherish the idea of multigenerational living (this is my own dream; don't tell my children). For the moment, though, we're stuck with some haves and a growing number of have-nots, who are watching their dreams sink into the ground.