The Toronto real estate market will have a devastating effect on homeowners
and real estate investors and now this will start to trickle down to those who
are renting in Toronto as well. Renters thought they were immune to the Toronto
real estate crash because they had not committed to a mortgage and only had to
worry about having the money for their rent each month. They figured that they
were safe and had time to wait until the real estate market started to rebound
before they could think about purchasing a home.
The problem that renters are facing is that while they do not have a mortgage
payment to worry about their landlords do. A landlord with an adjustable rate
mortgage now has higher monthly payments due to increased interest rates on the
loan and in order to survive, he has no other choice but to raise the rent in
order to meet the payment deadlines.
Some Toronto real estate has gone
into foreclosure as a result of the landlords not being able to keep up with the
mortgage payments or the rising property taxes. The result is that while renters
may feel that they are safe in this economic climate, they could be evicted if
this happens to the property they are renting. The eviction notice will give
them 30 days to leave the property and this is not enough time to find other,
suitable rental properties for them to live in. Thus, many Toronto renters who
have been renting the same property for years and have come to regard it as home
are finding themselves out on the street.
The rapidly rising rental rates have also had a serious impact on renters. These
rates have risen all over the country but none so much as in San Francisco and
New York. Seattle, which has so far evaded the worst of the effects of the
housing market crash is also starting to see rental rates increase as have San
Jose, Cleveland, San Bernardino and San Diego.
In areas where developers have not been able to construct apartment dwellings,
such as in Seattle because of the Growth Management Plan the state has in place,
there is a lack of rental properties available. Thus landlords can basically
name their price for the apartments. In other areas, the demand for rental
properties is more than the supply because homeowners who have had their homes
repossessed through foreclosure are also looking for places to rent at
reasonable prices.
The vacancy rate of rental properties has decreased more than 10% throughout the
country. This indicates that there are more renters in the housing market now
than there has been at any time in the past. According to the Census Bureau, the
cost of renting has also risen about 14%.
The increase in the cost of renting is due to several factors. Many renters do
want to eventually become real estate owners but are waiting out the recession
in the hope that house prices will take a further drop allowing them to purchase
Toronto real estate at prices below market value. Then when the Toronto real
estate market does rebound, they will be well placed to make a profit on the
sale because of the equity they have built up in the home. Many think that the
real estate market has not yet hit rock bottom and when it does they will pounce
of properties that are ripe for the picking.
Renters who would be buying real estate for the first time are also faced with
tighter lending restrictions. Even though interest rates are down, lenders are
requiring higher down payments, such as 20% of the purchase price. This amount
of money is beyond the capability of many first time Toronto real estate buyers
and they have to wait until their savings grow in order to meet these criteria.
In the past, lenders were willing to approve mortgages for those with bad
credit, but this option is no longer available. Now lenders scrutinize credit
reports and want to deal with only those who have an excellent credit rating.
With Toronto real estate in the state that is in, there are fewer apartment
buildings under construction. Builders, too, do not have access to the funding
sources of the past few years and the few who do have the money to build are
fearful of the Toronto real estate market as a whole.