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You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.

ROB: If you’re from an expensive city like Toronto or Vancouver, you’ve probably heard all the horror stories about surging home prices, about how people are leaving these big cities in search of cheaper real estate. But what about Canadians from these smaller towns? What’s the housing situation been like for them?

[THEME MUSIC]

ROMA: Today, we’re talking about how the pandemic has made housing more expensive in Canada’s small towns and cities. And what that means for the people who grew up there.

ROB: Welcome to Season four of Stress Test, a podcast about personal finance for Gen Z and millennials. I’m Rob Carrick, personal finance columnist at the Globe and Mail. ROMA: And I’m Roma Luciw, personal finance editor at The Globe.

ROB: So, Roma we’re at it again. Can you believe that after a year and a half of remote recording because of the pandemic, we finally got to get out there in person and see not only each other, but also our guests.

ROMA: And then, of course, on the one day we got out there with our whole production team, it rained and I mean, it poured the whole day.

ROB: That is true. I don’t think it let up for a split second. I had my windshield wipers on the whole way, travelling from Ottawa to Belleville, Ontario, which is where we went to discover what’s happening with small towns and housing.

ROMA: So Rob, we chose Belleville sort of after a bit of a search and an outreach. Let’s talk about how we got there.

ROB: Well, what we did is we asked readers of the Carrick on Money newsletter that’s my twice weekly email newsletter on all things to do with personal finance. We asked them to tell us their stories about what’s happening in their small town in terms of real estate. Are people from big cities moving in to take advantage of cheaper housing prices? And boy, did we hear a lot of sad stories. Why don’t you summarise them for us, Roma?

ROMA: Yeah, the influx of emails was amazing and the themes were consistent. People were upset and angry and I think a bit bewildered by the dramatic increase in house prices. We heard a lot of reaction from people within, you know, a number of hours of driving range of Toronto. But we know for a fact that people have left Toronto, Montreal, Vancouver. A lot of young buyers as well went to smaller towns and rural properties searching for cheaper housing. What that did for the people that were already living in these places is it drove up the price of housing there. It increased the amount of traffic there. It changed everything about it, including access to a doctor, access to a vet. People were struggling to find daycare spots. All of the things that you would imagine would happen by a bunch of people just being dropped in there without any changes to infrastructure.

ROB: Yeah, you know, this is a super interesting story, and it goes beyond personal finance and shows you how personal finance can sort of affect your entire life. Life in these small towns is changing, and that got us interested as journalists. What’s going on here, is there a story to report, and that is how we came to Belleville, Ontario. I’ve driven past Belleville about a million and a half times, traversing the four, a one between Toronto and Ottawa. It’s one of many little towns along the 401 close to Lake Ontario, where people have been migrating in search of cheaper housing. So what we did is we arranged a day of talking to people in Belleville to find out what’s happening in town and how do they feel about it.

ROMA: First up, we’ll hear from a young man named Cam. He’d always plan to buy his first home in a smaller city like Belleville. But COVID threw his plans out the window. That’s up next. PRE-ROLL AD: This podcast is brought to you by CPP Investments. Take comfort knowing the Canada Pension Plan Fund will be there for you. We invest to help ensure the CPP fund remains resilient over the long term, sustainable and secure for millions of Canadians. Learn more at CPP Investments Dotcom.

ROMA: In Belleville, we spoke with Cam, who grew up in the area. He and his fiancee were planning a wedding and saving for their first home before they start a family.

CAM: My name is Cam. I grew up in Tweed, Ontario, which is actually just about a half hour north of Belleville here, and I’m twenty four years old.

ROMA: Before the pandemic lockdown, life was looking really good for Cam. He was newly engaged and on track to buy a home in Belleville, where he’d always pictured himself living. He had his down payment money saved, was working with a realtor and had a mortgage specialist. By all accounts, he and his fiancee were in good shape. The couple had budgeted $350,000 for their starter home with a 10 per cent down payment.

CAM: I don’t know. We were optimistic. I have a friend of my dad’s who’s a realtor who was helping us out, and he set us up with an awesome mortgage specialist. Together, we were kind of a good team and everything was looking really positive. And when myself and my fiancee graduated from university, we moved back home and with my parents to save some money, and we kind of budgeted a year and a half to sort of save a down payment. We were on track to hit that.

ROMA: Then the pandemic hit. Cam and his fiancee first thought the housing market would crash and prices would drop. But as we all know, that didn’t happen.

CAM: We were both very lucky in that we weren’t unemployed during the pandemic. I was working with a company and she had a government job, so we were solid and then it sort of snowballed and snowballed and things got worse and worse. And we were noticing when we were going to look at houses that well...open houses for a while weren’t even happening. And then when they started to happen and we started to go, we noticed it was busier and busier. Prices were kind of getting higher and higher. And then we heard from our realtor a lot of like overbuilding, where people were placing bids for houses like way over asking. And it was getting crazy because we were hoping that we were going to be able to, you know, make offers around asking price. And that was slowly looking like it wasn’t going to be the case.

ROMA: You might be thinking that 24 is really young to want to own a home, but for Cam, who has a life plan, it made sense.

CAM: I don’t know. I’ve always had the understanding of, like, you know, certain goals in mind where I want to graduate from university and I want to, you know, start a family, but in my mind, becoming a home homeowner was kind of step one before starting a family.

ROMA: So during this time, there were three houses that Cam and his fiancee wanted to bid on, but they were snapped up before they even had the chance to put in an offer. Buyers were skipping home inspections to make their offer more appealing, and that’s something Cam refused to do despite seeing a house he really liked.

CAM: There were some concerns of like water damage in the basement and a little bit of markings in the ceiling as well and like the master bedroom. So I chatted with our realtor and said, “Well, I’d like to probably get an inspection.” And he basically said, if you request an inspection, you’re not going to get this house, which was quite shocking. It was basically looking like the market if you had to finance and you were going to ask for an inspection, there was no chance you were going to get the properties that you wanted.

ROMA: You think skipping a home inspection is a big deal? How about buying a home without actually ever stepping foot in it? A house on his parent’s street that he’s driven by his whole life was up for sale and in Cam’s price range, too. But the neighbours had started a sheep farm and the animals were getting pretty close to the property line.

CAM: So we looked at that and went, Oh my gosh, well, we don’t want that house because there’s going to be sheep at your doorstep in a matter of months, if not a year. And then we heard from our realtor that it went $50,000 over

asking sight unseen. Somebody from Toronto purchased it and had never seen it and paid over the asking price by quite a lot. A lot more than we could manage.

ROMA: In hindsight, what would Cam say to the buyers of that sheep home?

CAM: I’d congratulate them because I wish I had looked past the sheep and purchased the home.

ROMA:  So despite doing everything right to buy a starter home...live with your parents, limit your spending and save a down payment, Cam still feels like breaking into the housing market where he grew up, it’s just not possible right now.

CAM: We thought that we’d be able to afford in our hometown and that that wasn’t the case. We quickly realised so yeah, it was. It was frustrating. Now our game plan has been kind of to step back and I don’t know hope that the market crashes a little bit, save more of a down payment so we can afford something more expensive. We had to invest in a new vehicle because one of our vehicles wasn’t cutting it for us anymore, so we had to dip into our down payment money for that. But yeah, even in car buying, we couldn’t go in and finance a new car because that would affect us getting a mortgage. That was a bit difficult too because I have a lot of friends that I’ve seen kind of say, screw it, and they’ve went and financed a brand new car. And yeah, I don’t know, we were told by our mortgage, our mortgage specialists, that if you do that, you’re kind of tying your hands in the next five years because that’s seen as against your income kind of thing.

ROMA: Cam isn’t an anomaly when it comes to locals being priced out of their small town housing markets. A lot of his friends are having the same experience or worse.

CAM: On the other hand, I have lots of other friends who are single. They don’t have access to dual income like myself and my fiancee do. And feel absolutely helpless because being able to afford a home on a single income unless you make a crazy amount is pretty impossible. And then I have other couple of friends that are in the same boat as us. They want to purchase a home. But even their dual income housing isn’t cutting it. And yeah, a lot of friends have moved to the city as well, and they kind of had the expectation that they’d be unable to afford a home there. So, yeah, a lot of my friends are all stuck in rentals and unable to get out.

ROMA: Cam sees both sides of the housing situation in his home community of Belleville. Right now, the couple has paused house hunting and are renting a place from his grandma, which he’s helping fix up.

CAM: I think it’s done a lot of great things for the community. I think there’s a lot of businesses that rely on the growth of Belleville, but at the same time, it’s just kind of pricing out people like me that can’t afford to live here anymore. Yeah, it’s just a challenging time to be a first time home buyer. [MUSIC]

ROB: What blows me away about Cam’s story is that this is Belleville, Ontario, a very nice little city, but never one to experience high priced real estate. In the past, the pandemic has completely upended this city’s housing market, and so many others like it. What’s your impression, Roma?

ROMA: One thing that strikes me is how together Cam is for such a young man. He’s smart, he’s articulate, he’s focused. He made all of the right steps for someone looking to buy a home. In many ways, his story is just really about bad timing. I mean, if he’d bought a house six months or a year before the pandemic hit, he’d be sitting pretty now. But looking ahead, I mean, I think you and I both probably agree that at some point Cam will be a homeowner.

ROB: Oh, for sure. But you know what interests me here is that there are cities and towns of Cam’s all across the country who have hit a brick wall of homeownership in their small town. That used to be the place where you could afford to buy. ROMA:  Absolutely. And so what we’re seeing is the spillover of that housing frenzy. And unfortunately for Cam, it’s hit him at the wrong time. ROB: Cam’s frustration with house prices isn’t a one off. After the break, we’ll hear from a local realtor about how much prices have jumped and how local millennials are dealing with it.

[MIDROLL AD]

ROB: On our rainy road trip, we also met with Don McColl, a realtor with Ekort Realty brokerage. He took us on a tour of a typical Belleville neighbourhood. The streets had mature trees, a mix of wartime bungalows and large brick family homes with bikes and well-tended gardens out front. At the end of the street, a closed down factory, Don said it might get built into a subdivision. So we asked Don what he predicts will happen to the housing market in Belleville as we come out of the pandemic.

DON: It’s a hard thing to predict, right. It’s supply is the issue. There’s so few houses on the market. That’s what’s driving the price up, and there’s a lot of factors have gone into it. Around here it seems to be people moving in from out of the area. But, you know, on a national basis, there’s lots of other issues I think that are causing this. But I don’t see a slowdown in the near-term.

ROB: According to Don, the price range for a first time home buyer pre-pandemic would be in the $200,000 range. That would get you a three to four bedroom house with two bathrooms. Now that $200,000 starter home has doubled in price to $400,000 or more.

DON: Well, now it’s difficult because you run into a lot of times 18, 20, 25 offers on a place. It changes how you have to do your offer. Home inspections don’t happen as often. Crunch time on financing a lot of people, if they’re selling in Toronto, they can come down here and buy if they’ve already sold their house, so there is no financing clause. So it’s like you see a lot more cash offers, where before you’d have, you know, time to do a home inspection. And if you’re outside of the city to do a well test and a septic inspection and things like that, and you don’t have those opportunities as much anymore.

ROB: Like many towns close to a big city, home prices grew extremely fast in Belleville and its surrounding areas.

DON: I had a client that looked at a house last year, so not in town, but in Belleville, still in Thurlow wards that’s up north of the 401. And last year, in August, it sold for $385,000. This year, in August, it sold for $580,000.

ROB: Don, who has four children in their 20s, says none of them can afford a house right now. They all still live at home with him.

DON: Well, it drives a lot of the first time buyers out of the market because the prices have gone up so much. Like I said you could buy a house for two hundred thousand before. I showed a house last night. This was in Trenton and it was listed at one $199,900. That’s the first time in a long time I’ve seen a house listed at that and it wasn’t liveable. Had to be a completely gutted and redone. And I heard last night, there were nine offers in on it. Just about every time I look at a place and go, I can’t believe it’s worth that much, and then it sells for even more. That’s just daily, daily daily. You see that it’s and it’s hard to describe.

[MUSIC]

ROMA: Small towns like Belleville have never experienced hot housing market like this before. Used to be the case that if you lived in a smaller town like Belleville, you had a good job, you’d saved a little bit. You would be able to afford to buy a home without bankrupting yourself. It was just something that could happen. And now what we’re seeing is that equation has been turned on its head by the pandemic. This influx of buyers coming in the bidding wars, the buying houses sights unseen, those were things that never would have happened in Belleville.

ROB: What I find really interesting about Don is that he’s living both sides of the housing story. He’s a real estate agent. He’s at ground zero of all this, but he also has millennial age kids who are having trouble getting into Belleville’s housing market.

ROMA: The thing that strikes me is how quickly the entire situation turned on its head. We’re talking about the period of a year and a half, two years...to have a real estate market transformed like that so quickly. I think that’s what towns like Belleville are grappling with.

ROB: Yeah, that’s true. We’ve undone decades, maybe even centuries of affordability in small towns.

ROMA: And I think the main thing that we’ve been seeing in all of the housing stories we’ve covered is that the pandemic has exacerbated this feeling of helplessness and anger and desperation among the young adults that are trying to buy homes. They really feel like they’ve missed out. And that’s part of what’s pushed people into smaller towns and cities like this to look for houses in places like Belleville. [MUSIC] ROMA: New residents to the city means more demand for services like child care, family doctors, vets and tradespeople. Just down from the residential street we visited with Don is a daycare called First Adventures. I spoke with director Debbie Milne about what the influx of new families coming to Belleville means for their daycare.

DEBBIE: I love that we’re getting a much more diverse group, broader ethnicity. We have always had a waiting list, so we have actually had people coming from Toronto, coming from Ottawa, and they’re phoning to go on our waiting list before they’ve even got a house in this community. We’re seeing a huge, a significant growth in the for profit centre in our community. We have one, two, three new for profit centres that have opened.

ROMA: That’s right. People from other cities are putting their names on the waiting list even before they actually buy a home in Belleville.

DEBBIE: I have families that are travelling from Brighton and from Picton for child care, so it is really significant. There’s not enough to serve the current community or the growing community.

[MUSIC]

ROB: You know what the story of Belleville highlights for me is how the housing story has grown from something that happened in Toronto and Vancouver. And that it was Toronto and Vancouver and surrounding cities. And then it was Ottawa and Montreal were part of it. Now it’s national, and Belleville helps document this. People are flowing out of big cities across the country. They’re looking for affordable housing, they’re filling up small towns and affecting their real estate markets. And it is a story I think we’re going to be looking at for years to come.

ROMA: Couldn’t agree more. The fallout from this will be something we’ll be keeping an eye on whether some of these buyers decide that they’re going to return back to the big cities, whether they’ll be forced to, whether they’ll decide that they love living in Belleville. Whether or not the infrastructure, the amount of doctors, daycares and so on ends up picking up and being able to accommodate the families that are living there. This is a really interesting turning point that we’re in in terms of where people are living and how they choose to live. Certainly, affordable housing has changed the equation and sent people looking in places that they wouldn’t have before.

ROB: What’s happening in Belleville also changes the personal finance housing. We’ve been saying for a while that if you can’t afford to live in the city, move out to the country, move out to a smaller city. Well, now we’ve got a generation of people who’ve moved to those smaller cities, raised the prices. We’re going to have to look to even smaller communities and even more far flung places. And I’ll just add on a note. Something interesting that the Cam was mentioning is that when you go outside a Belleville, the internet isn’t that great. So it’s not that easy to move outside of the bigger cities and even the smaller cities.

ROMA: Thanks for listening to Stress Test. This show was produced by Amy Chyan and Zahra Kozhema. Audio engineering and editing by Kyle Fulton. Our executive producer is Kiran Rana. Thank you to guests Cam, Don McColl and Debbie.

ROB: If you like what you heard, give us a five star rating and review on Apple Podcasts. Our next episode talks about inflation. Are you noticing your everyday costs of living rising from groceries to gas prices? Why is it happening and how long will it last? You don’t want to miss this one.

ROMA: You can find Stress Test at Apple Podcasts, Google Play, Spotify or your favourite podcast app. And find us at the GlobeandMail.com, where we cover all things financial. Thanks for listening to our Belleville Road trip! See you next week!