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.
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.
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.”
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.
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.
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?