A sold sign outside a house in Toronto, on May 20, 2021.CHRIS HELGREN/Reuters
I thought of Alberta-based Bridget Casey right away when I set out to get the millennial and Gen Z perspective on the housing market into the newsletter. Ms. Casey, founder of the website Money After Graduation, tosses incisive opinions around like hand grenades. In this Q&A we did recently by e-mail, she fully delivers. Prepare for some blunt talk on housing affordability.
Q: What’s your sense of how angry young adults are about not being able to afford houses?
A: It’s more despair than anger, to be honest. They’re definitely frustrated but the tone is more hopelessness than rage. Younger millennials and Gen Z are gobsmacked at the price of houses and are hoping the math somehow works out, but doubt it will. Older millennials simply feel defeated at this point if they were not able to get into the housing market and are grudgingly resigning to never having a shot.
Q: What’s driving the hunger among young adults to own homes?
A: It’s still largely boomer parents, and now Gen X parents, but there’s also a problem with banks pushing it more than ever. I get bi-weekly emails about mortgage offers from every financial institution. My brokerage now offers mortgages. Home decor and house flipping are also major trends on social media. I’m as guilty as anyone for using TikTok, Pinterest, Instagram to browse home renovations. It all sells you on making a space your own. There’s a ton of pressure from all sources.
Q: What, if anything, should the federal government do to help young adults get into the housing market?
A: Ironically, the answer is to stop helping them get into it. Increasing the RRSP first-time Home Buyers’ Plan from $25,000 to $35,000, introducing the First-Time Home Buyer Incentive, keeping interest rates low – all these things are harming young people in the long-term, even if it’s helping them get a house in the short term. People keep thinking about buying a house. They’re never thinking about the costs of actually owning one.
Q: Renting is the obvious alternative to expensive housing, but rents are climbing in some cities. What’s the solution for young adults who need a place to live?
A: There is no magic hack that will make housing more affordable in your area. Your choices are to increase your income or move. I hope so many companies switching to remote work has opened up the possibility for more people to work from home. That would give young people the chance to choose a more affordable neighbourhood, or even more affordable town or city. I have friends that work remotely for major tech companies like Shopify and Facebook. They earn great paycheques, and they choose to live in small cities where that income goes really far.
Q: Do you have any thoughts on the ideal age to buy a home? Asking for two reasons – one is that young 20-somethings seem very keen to tie themselves down with a house, and another is that buying later seems feasible given long lifespans.
A: In hot real estate markets where prices increase rapidly, it can seem tempting to buy when you’re young and lock in at a lower price, but they forget it locks you down to that city. I moved between cities in my 20s for graduate school and job offers, and I’m glad I had the flexibility as a renter to up and leave so easily. Every time I’ve moved it’s increased my annual income by $15,000 or more. I can’t imagine if I had declined those opportunities to stay in one place and “build equity” in my home, or still pursued them but had to deal with the hassle and costs of selling and buying new homes each time I moved. I would say late 20′s to early 30s are ideal to buy a home, when you’ve settled into your career and know where you want to raise your family if you plan to have one.
Q: What’s your housing situation and where do you see yourself in 10 years, housing-wise?
A: I am still a renter but will likely buy in the next one to two years. I thought I was unique, but turns out I’m part of a measurable millennial demographic that skips the starter home and goes right to splurging on a luxury home. Renting has always given me extra cash to put in the stock market, and I ended up with more equity in financial securities than most of my friends have in their homes. I’ll be buying not as an investment, but simply to have somewhere nice for my daughter and I to live. Now that I’m in my mid-30s I’m less likely to move, I’ve hit my stride in my career, my retirement is taken care of and buying a home no longer feels like it would stretch or strain my budget.
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Rob’s personal finance reading list
The pre-pandemic stock market is not coming back
An important read if you think the youngbloods who got into stock trading in the past year will bow out, bringing a return to markets that trade on old fashioned fundamentals. According to this article, it’s their stock market now.
If housing is out of reach, should you just wait?
Some perspective here on the hot U.S. housing market, where prices are rising out of reach in some cities. An economics writer who predicted the 2007 housing crash: “It’s so hard to say without knowing the city, but generally, if you’re in a market where you consistently have to spend significantly above listing, I wouldn’t buy right now,”
Best online brokers
A list of top brokers and stock-trading apps compiled by the Young & Thrifty blog. Questrade takes it. I like Questrade, but rank it lower.
18 things to do with leftover pasta sauce
Lots of great ideas here for that half-used jar of pasta sauce. Or, you can let your sauce sit around in the fridge until it becomes a mould farm. Enough with the food-wasting.
Today’s financial tool
The My Own Advisor blog presents a list of helpful online calculators and worksheets.
The money-free zone
Make Me Feel Alright is the second song I’ve featured from the new Robert Finley album, Sharecropper’s Son. In case you missed it, the first was Souled Out on You. Soul, rock, blues – Finley does it all.
Watch this
Introducing the My Money, My Future: Canadian Financial Education Challenge, where teens aged 14 to 18 were invited to create a new resource of any type to teach others about money. Here’s a highlight reel of the 10 finalists. The two hosts are great.
What I’ve been writing about
- Four ways to prepare your portfolio for the bursting of the bubble
- 2021 vs. 1992: I couldn’t afford my Toronto house if I had to buy in Canada’s current real estate market
- These moves can cut your ETF commissions from hundreds of dollars a year to zero
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick