From the New York Times:

It is a paradox of the red-hot real estate market around Toronto: Some owners are not selling because prices are too high. …

Last month, the average sale price in Oakville hit 1.4 million Canadian dollars ($1 million), 30 percent higher than a year ago. Prices are climbing into seven figures across the region, and rentals are expensive and difficult to find.

Those daunting figures have driven thousands of young adults back into their childhood bedrooms. An unusually high 56.5 percent of people in their 20s in the Toronto area still live with their parents, compared with 42 percent nationwide….

It can make sense financially for them, but it also makes the affordability problem worse. Basic economics says that high prices ought to entice more owners to sell, with the added supply helping to relieve some of the upward pressure. But that is not happening in Toronto, where, despite intense demand, the rate of new listings has been stagnant for several years, and even fell 12 percent last month.

There may be several reasons more Toronto-area homeowners are not doing what the economics textbooks predict. Some analysts believe that parents who might otherwise sell, but are staying put to accommodate their adult children, are a significant factor. …

Murtaza Haider, a professor of real estate management at Ryerson University in Toronto who specializes in data analysis, said the large number of adults still living with parents was an important factor. In parts of the area, the rate is as high as 78 percent, according to Statistics Canada, the federal census agency.

Some of that comes from social traditions among certain immigrant groups, but Professor Haider and others say the trend is driven more by high house prices and an increasingly unstable job market for young adults.

More here.

Comments

  1. Basic economics may suggest a certain optimal behaviour, but there are of course other factors at play. What we’re seeing play out here is that the assumption that boomers would all happily sell their homes and downsize was totally false.
    This makes sense when one considers that the notion of downsizing has a great deal of negatives attached.
    For one thing what are boomers downsizing to? A shoebox condo? It’s not terribly attractive for a variety of reasons. It’s too small, and unlike a detached home, a total lack of control. Maybe ok for some but not all.
    The most significant thing is that because we have only been intensifying housing in certain areas, downsizing likely comes with it a requirement to shift neighbourhoods or even cities. Why would someone want to disrupt their routine and social network so late in life by doing this?

    1. Very true. When a house is a home paid for through a decade or two of blood, sweat, tears, sacrifice, and the rewards of families growing, selling is the last thing on one’s mind no matter what a number on a piece of paper says. A house can be key to one’s family identity, and it elevates in stature as the neighbourhood around it matures. It can have tremendous value in the non-monetary sense.
      If one does not value their home as a place to grow, they do not value their neighbourhood or city.

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