Notes of An Exasperated Would-be Home Buyer

I recently came across two different reports/commentaries in the media relating to millennials and our financial situations that made me want to break things.

Those Rich Millennials, buying all the houses…

The Bank of Montreal released a report noting that 30-somethings have 2% more disposable income than our parents had at our age. We’re “richer,” it said. My husband and I laughed about how many counterpoints were glossed over or left out completely. “Stupid,” we concluded. But soon after we read that report, we heard a discussion on CBC’s Fresh Air–tips for new homebuyers (who are typically in the early-30s age range).

I was making pancakes, as I do every Saturday morning, in our cramped rental kitchen covered with flour, when we heard the promo for the upcoming show. We were interested–a useful discussion for us, since we’d love to be homeowners sometime in the near future.

“what Subprime Crisis” by woodleywonderworks on Flickr

In the beginning of the interview, the host, Mary Ito, asked that first, basic question about home-buying–what can you afford? And the guest, CBC’s financial contributor, cooly outlined the standard 30% rule–that your mortgage should be no greater than 30% of your monthly gross income.

As we sat there eating our pancakes, our eye-rolling quickly escalated into shouting at the radio. What planet are these people living on?! “I feel like we just sat through a bank seminar on home buying,” Mike said.

Reality Check

Here’s a very unscientific look at the home buying reality here in Canada. I like to call this “The Canadian Home Buying Table of Doom.”

Homebuying Table of Doom

It’s important to note that my math is completely off, because it doesn’t include property taxes, mortgage insurance, or heating costs, which are typically thrown into the 30% rule calculations. (I omitted these out of laziness but mostly exasperation.)

So in other words, the “required salary” in the Table of Doom is too low. The average (mean) Canadian annual household income is $87,000 (and the median is actually just over $72,000, in 2011). Given that, the average Canadian can just barely, or not even, afford the average home in Canada. And the average Canadian is totally screwed if they live in Toronto. Or if one of the members of the household wants to stay home to raise kids.

Then we’ll just rent forever! Yes! Problem solved! And this was mentioned towards end of the interview. Yet the hasty conclusion, for a variety of reasons: sure, you could rent but… you’re still better off buying.

With both the BMO report and the “Fresh Air” discussion, there are so many counterpoints to their declarations. What about the fact that…

  • living expenses are much higher than for our parents’ generation?
  • our personal debt is higher because we need a higher level of education to maybe get a similar job to our parents? And that these jobs probably won’t have the same type of security or benefits?
  • the cost of homes are proportionally much higher now than they were when our parents were first buying their homes?

These discussions just entirely ignored the current reality for our generation, so much so that I find it insulting.

This sort of thing comes in the mail daily from local real estate agents. Jerks.

124% of Asking?! This sort of thing comes in the mail daily from local real estate agents. Jerks.

For my readers south of the border, I realize that the American housing market is very different than Canada’s. However, the problems reflect a shared experience of our generation. We could easily have a similar discussion about the job market in the US and Canada, or the growing income gap.

And yet, the rules of financial fitness, home buying, and career-building are still proffered like gospel, and if we’re unable to follow these rules, we must be doing something wrong. The conspiracy-theorist in me feels like the “establishment” that benefits from us buying into this model is just perpetuating the myths for its own gain. The less suspicious side of me figures that it just takes a long time for the old order to die out completely. What do you think?

The Bigger Picture

I realize I’ve already written this rant. I guess I just need to keep beating this drum, for myself as much as for others, because the “old rules” are still out there. This whole discussion about the self-styled life isn’t just coming from a desire to create a life based on personal fancy. It’s also born out of necessity. The traditional model does not fit with the current reality for many people, which is why we are looking for alternatives.

Source

 

Because of this, I have to check in from time to time–to repeat my priorities to myself in an effort to combat the feelings of inadequacy–the pressures that tell me I still don’t have everything I’m supposed to want. I might not have a house, I might not be a “career woman,” we might forever be buying used cars, etc. But when I really take stock, I know that I am happy. And I’m excited about our plans: taking sabbaticals, investing in experiences rather than stuff, staying home to raise a family.

Whether driven by desire or necessity, the beauty of the self-styled life is that done well, it could offer greater rewards than the traditional model would. It’s up to us to make it that way.

What is the housing market like in your city? Do you agree with the assessment that Millennials are playing in a rigged game? Or am I being a typical whiny Millennial?

Sources: 

Canadian Housing Costs

Toronto Housing Costs

 

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9 responses to “Notes of An Exasperated Would-be Home Buyer

  1. Wow, I love the diversity of opinions happening here! It really speaks to the situation we have today, I think. So let’s see if we can find some common ground! haha 🙂

  2. Hi there, I live in Germany. Buying and selling a house is definitely easier in the USA than it is is Germany. I could go on about why this is, but will refrain. Most people rent in Germany or buy a part of a house. So there could be a few families living in a house together…seperate ”appartments” so to speak. Germany is smaller than the USA and Cananda. It doesn’t bother most people not to have a house. There is a since of worth in sharing space so that we all have more and so the environment stays clean.

    I like the fact that you don’t let this defeat you. You have made a decision to self-style your life. The best way to go.

    • Hi, Rebekah—thanks for reading and commenting! It’s so interesting to hear about how other people live, and the different expectations that come along with that. So, I have a few questions. One of my biggest let-downs about not being a homeowner is never having the opportunity to do renovations on a home. Our current rental is quite adequate and lovely, but in an ideal world I would fix up the kitchen and bathrooms. Do people in Germany make improvements even on rental homes?

      I also worry about the issue of longevity. We have a year-long lease. We would have signed a longer one but our landlords didn’t want to. I always worry that they will sell and we’ll have to move on. What is the typical lease like there?

      Thanks so much for sharing your thoughts!

      • We do make improvements on rental homes. We paint or change wall paper ever 5 to 7 years depending on what is in the contract. But fixing the roof or remodeling is done by the home owner.

        There are a few odd things about renting in Germany…
        1. Most times you have to buy your own kitchen. People move with thier kitchen. I know it is a crazy idea for an American (not sure about Canada). Plus there are often no light fixtures in the house. Those also move from home to home. Germans are big on thier toilet seats and lids. All toilets have them when you move in but the renter normaly takes it off and either puts it in the basement until moving out or just throws it away and buys a new one. There are also no built in closets like in the U.S.A.

        There are rules about leasing. You have to give at least 3 months notice before moving out. If you move out sooner you must still pay the three months. A home owner cannot kick you out of thier home unless he or she needs it for private use. This is a special case that rarely happens. Even then you have at least three month time to move out.

        If the home owner wants to sell the house they must first ask the renter if he/she wants to buy. If the renter says no, the home owner may sell to someone else. But the new home owner cannot kick the renter out of the house if occupied at the time bought.

        There are plenty of laws protecting the rights of renters. We are even in a Renters organization, so if we get into a leagal disagreement with the home owner, then the Renters Organization gives us a lawyer and takes care of all the paper work. It cost about 15 Euros per year. Fair enough!

        • Thanks so much for your feedback! A post on the German rental lifestyle is in the works! Those sound like some very renter-friendly rules. It sounds like there’s generally a very different mindset on renting and owning property there in Germany than here in North America.

          I’m totally with the Germans on the toilet seats, though. We definitely need to adopt that practice! 🙂

  3. We all have to make choices and sacrifices in our lives. Where you live is one of them. Perhaps Winnipeg is a small city compared to Toronto but the cost of living is not as bad. It usually comes down to where you prefer to live.

    When we (my husband and I) started out, we bought a “war-time”home and lived there for a couple of years. We “bought” and “sold” many homes and each time, we made some profit which we put straight down on the payment for the next home. We kept our payments always the same even though the mortgage was lower so that we could pay it off sooner one day.

    Inflation now, if you want to call it that, is the same as it was back in the ’70’s. We would bring home about $150 clear a month per person. Our food costs were less than today but so was the salary. We seldom bought “new” and second hand was the only way to make ends meet. Private sales, auctions, thrift stores and garage sales were our means of existence. Even cars were pre-owned and we always saved ahead when we thought we would have to get a newer used one. We seldom ever ate out and all food was cooked from scratch. We were lucky “back then” in the fact that we could go and collect plastic and glass bottles and pop tins to turn in for extra cash. We walked many a mile along the highways picking cans and beer bottles. We did whatever it took to find those extra pennies and dollars.

    I worked as a paraprofessional for 10 years because it was a job I loved. Sad to say, there were no pension or health benefits for me then so now I am dependent on what we were able to put into RRSP’s which didn’t happen until we were in our mid-40’s – once our children were grown.

    I guess the “trick” in life is to have a goal, make sure you follow a budget that will allow you some of your wishes, and to be happy everyday knowing you have a lovely family and people to love.

    Goals are great to have as long as they don’t shadow your thoughts daily so that you don’t see what you do have already.

    • Thanks so much for sharing your thoughts! I love the suggestion of setting clear goals to work towards, while still appreciating what you have in the present! That’s great advice.

      I definitely appreciate the fact that we live in a very high cost of living area. That’s not lost on us at all. But when we moved here, part of our calculation was knowing that this city offered a lot more opportunity. When we were living in our beautiful house in Eastern Ontario, that cost only $145,000, the cost of living was certainly more palatable across the board. However, our opportunities were so limited, and we could not, after years of searching, find jobs that matched our education.

      And now here we are in a very expensive city, but the gamble paid off as Mike does have a great job and is making use of his degree. I recognize that there might be good opportunities across the country, but how far do we have to go from family just to be able to find those, and at what point does the need to move start to become unreasonable?

      And we certainly know about scrimping and sacrificing. We have one car, which we bought used, and oh wouldn’t we love an upgrade that would fit more than just a stroller in the back!? But we’re making do. I cook basically all of our meals from scratch. We rarely eat out or order in. We pretty much never go “out” to the movies or whatnot. Most of Linden’s clothing is used and we’re basically only buying new clothes to replace the ones that finally wear out. Etc etc etc. We’re definitely not living the high life here.

      I guess my point is just that I certainly don’t want to suggest that your generation had it “easy” in comparison. My parents, too, made many sacrifices and have lived a modest but happy life. I’m grateful for that example.

      It just seems that, when you look at the numbers and the facts, our generation is having to jump through a lot more hoops just to get started and make ends meet.

      Again, thank your for perspective. I do think it’s important for everyone to temper their expectations with stories such as yours—we definitely shouldn’t expect to have everything come easy.

      🙂

  4. I just recently read an article about how the baby boomer generation has ruined America. I realize that you are speaking about Canada, but it is the same situation as in America. It is ridiculous how much worse off we are than our parents generation (which was not very smart, just look at the American Congress). Social security and pensions are non-existent. I believe in 2033, social security is expected to run out so we will have no benefits, yet we are still paying into it just so they can live more comfortably in their old age. Some of my friends have still had trouble getting jobs because all the baby boomers refuse to leave due to the fact that they have zero financial education, and just took everything the greatest generation worked so hard for.

    Then they constantly gripe about this “new generation” of “kids these days” that are fat, lazy, and stupid or whatever, when baby boomers literally made them! It is easy to see when you look at the U.S national debt that their generation is responsible for creating it. You would think that having been raised by the greatest generation that fought Nazism and sacrificed so much to win World War II that they would be able to take the ball and run with it. Instead, they handed it off to China and completely sold out. Then they constantly use that same phrase “things used to be better” or “we are losing traditional America.” They are right; things used to be better before they took over. The worst part about their ignorance is that they are proud of it.

    • Yeah, it just seems like the thing that older generations do–critique the young ones! I don’t want to place all of the blame on the Boomers for the situation we’re in now, but I definitely think some miscalculations were made. The numbers just aren’t adding up any more!

      Thanks so much for your comments!

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