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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: For most Canadian twentysomethings, buying a home is about as realistic as time travel.

ROMA: Worn down by year after year of soaring housing prices, there was a glimmer of hope that they would fall hard in 2023. And while they did go down, higher mortgage rates have left housing as unaffordable as ever.

ROB: Welcome to Stress Test, a personal finance podcast for millennials and Gen Z. I’m Rob Carrick, a personal finance columnist at the Globe and Mail.

ROMA: And I’m Roma Luciw, a personal finance editor at the Globe.

ROB: It’s spring housing season in Canada, which means the real estate industrial complex is bombarding us with pressure to buy a place of our own. But today’s Stress Test, we want to acknowledge the reality that millennials and especially Gen Zs, are facing. Real estate prices are so high that many will never own a home, particularly in Canada’s larger cities. And that’s okay.

ROMA: For those without family help or oversize paychecks. Buying a home is just not financially realistic. In Toronto or Vancouver, the amount an aspiring homeowner would need to save for a down payment for even a condo, never mind a house, would take decades. ROMA: We know Canadians are almost singularly obsessed with home ownership. So talking about this topic, the fact that many young Canadians are paying more than ever for rent and will potentially not own homes is going to be upsetting for some people. But it’s also the current reality. And we’re journalists who report on the facts and what we hear and see. To get a sense of what people in their twenties and thirties are feeling about this, we ran an online survey last week. We had about 1500 respondents. What jumped out at you about what they said?

ROB: What jumped out at me was the high number of people who are having serious doubts or are convinced it ain’t ever going to happen. This is getting into the housing market thing, but 44% are in those two categories, throwing up their hands or very doubtful. 19% are confident they’re going to get into the housing market, to shocks me because owning a home has to be the top financial aspiration in Canada. And yet only 20% feel they were able to do it.

ROMA: Now, there was a period in time, ROB, where we thought higher interest rates were going to lead to a price dip. What happened?

ROB: So the correction in housing was really about prices, not affordability. Prices declined, but interest rates rose, and they sort of canceled each other out. So there was really no improvement in affordability at all.

ROMA: The other thing, Rob, that you and I have talked about over the years a lot is this idea that what you want and who you are and how you choose to construct your life at 25 is going to be different than it is at 45 and at 65. Can you touch on that a bit?

ROB: Well, for sure. You know, your twenties are a decade of getting established. And I would not want to draw any long-term conclusions about how your finances are going to be by anything happening in your twenties. The twenties are your time to discover what you’re interested in. Try to start your career and get oriented. So if you buy a house in your thirties, I think that is A-OK. And in fact, I’ve written columns before about how you could buy a house at age 40 and get your mortgage paid off and put a little bit of extra retirement savings in towards the end and retire at a decent age. And it all works out. So I wouldn’t want people to start thinking like housing is crossed off their list permanently and forever just because, at age 27, it’s not all coming together.

ROMA: Right at the same time. We do need to acknowledge that for a growing number of Canadians, homeownership will be off the table, and that is okay. You are not alone. You are not doing anything wrong. You can lead a very wonderful, happy, fulfilling life. And I think the important thing is to acknowledge that this is happening across the country. So we’re dedicating this episode to exploring why people are giving up on home ownership and how they see their financial future. Our first guest is up after the break.

MIKE: So my name is Mike. I’m from Hamilton, Ontario, and I’m 27.

ROMA: Mike works as a validation officer in automotive finance. He doesn’t worry about his finances on a day-to-day basis, but he has some concerns about the long term.

MIKE: Homeownership doesn’t seem like something that’s going to be on the table for me, at least in the next 20 years, to say the least. I am somewhat anxious about that. In some ways, it helps to know that a lot of my peers are in the same boat; in some ways, it’s a bit disheartening to know that some of my peers are in the same boat because it’s not so much a problem. It’s a larger problem.

ROMA: For now, Mike lives at his mother’s house.

MIKE: And so, in some ways, it provides a lot of temporary financial breathing room. But generally speaking, I tend to put any extra money I have towards paying off about the $33,000 of student debt I have.

ROMA: If housing was cheaper, he said he would be saving for a down payment. Real estate has gotten way more expensive in his hometown over the past decade.

MIKE: It’s been relatively affordable. Certainly, affordability wasn’t a major concern when I left high school in 2013. Part of why I went to university was I thought this would help me buy a house. Rent certainly seemed to increase, and it seems it’s a big concern of mine even though I’m relatively confident I can increase how much money I earn.

ROMA: Mike makes about $40,000 a year. His work situation is only going to get better, but that’s still likely not enough to buy a home.

MIKE: And so primarily, homeownership is something I had aspired towards, primarily for the security and the freedom, both in the sense that you don’t have to worry about things like being renovated or in the freedom, in the sense that if you want to make a repair to your house, not only can you make that repair whenever you want to and to whatever standard you want to, for instance, as you can, if you want to repair your bathroom, you can repair it to whatever standard you want, not necessarily whatever the landlord thinks is an appropriate amount. Really? I guess living like the stereotypical Canadian dream was kind of getting the luxury of actually owning a place. My mother owned a house; my grandparents owned a house after they immigrated to Canada in the 1950s. Pretty good experiences with homeownership. It’s something that I just thought, you know, if you applied yourself, you could do perhaps in another era it was. But yeah, seems like a pretty nice deal to have.

ROMA: Mike is currently single, so he doesn’t need much space. He figures it would cost at least 500,000 to get what he wants in Hamilton, and things would need to change for him to afford that.

MIKE: I’d say in order to get to that half-million dollar house range, assuming prices stay equal, at least one of two things. One would be to have a significant increase in my income. Obviously, the more you can save for that down payment, the more flexibility that gives you, and also, the more you can take on in terms of a mortgage payment. Alternately, although this is something that I know won’t happen for me, it’s having a family member give me enough money for a down payment on a house.

ROMA: At this point, Mike isn’t thinking about buying a house.

MIKE: For me, the idea of giving up on homeownership below is perhaps practical. It’s certainly easy not to stress out about housing prices every day all the time. It makes me feel quite bitter about it. One of the things I grew up with was the basic expectation that homeownership was just something you could achieve if you applied yourself. I think part of that bitterness also comes from a historical perspective, a decrease in living standards compared to previous generations.

ROMA: Mike isn’t alone. None of his close friends own houses either.

MIKE: They all live at their parent’s houses as well. However, I should mention that I know of at least two of them who are living with their parents to save up money for a down payment on a house. So that’s a big caveat.

ROMA: And he notices a big difference between them and his peers that do own homes.

MIKE: Typically, they have help from their parents for the down payment on a house. I’d say that’s by far the biggest factor as well. I’ve even heard of a few who have. When the interest rates went up on mortgages, they had their parents covering the last couple hundred dollars of that monthly payment. And also, a lot of them tend to come from more well-off middle-class and above backgrounds. And typically, they seem to have career outcomes that also allow them to not so much make more money but get to a better earning position faster than some of us, more working class. And also say, though the other thing I’ve noticed, too, was its individuals can have a similarly well-earning partner they live with. It’s obviously a lot easier to make that mortgage payment when you have someone to split with a decent income as well as to split it with. One of the things I like to joke about with my friends is that I didn’t know when I was in high school that my lack of a dating life would impact me so much financially.

ROMA: All this said Mike is still in his mid-twenties. There’s a lot that could change. He’d even consider moving to Alberta for job opportunities and affordability.

MIKE: So in terms of the stepping stones I have for myself in terms of working towards that, I want to work towards over the next couple of years, I’d say obviously moving up in my career, more money has never been a bad thing to deal with most of the time. I think in terms of perhaps getting into the rental market first and then kind of seeing how that goes, potentially moving to a cheaper part of the country as my career progresses. Yeah, I’d say, like with home ownership, it’s just something that you kind of have as more like would be nice to have. But I feel like home ownership, to me, it’s almost at this point, it’s almost like being a Major League Baseball player. You know, it’s okay to give up on dreams that are that unrealistic.

CODY: I’m Cody. I’m from Toronto, and I’m 31 years old.

ROB: Our next guest is a business consultant in his early thirties. He saved enough for a down payment on a condo, but at this point, he doesn’t think it’s worth it to buy.

CODY: My finances today are pretty much a majority in cash, so I’ve saved around $160,000 in cash. I would be eligible to withdraw 35 K from the home buyers for my RSP and have roughly another $30,000 in my tax-free savings account, all fully allocated and prepared to use towards housing, which basically gives me a down payment of 250 K. But even with that substantial amount, you know, even using an example for a one-bedroom condo in Toronto, $700- $800,000 with $200,000 down is still $3500 a month in mortgage payment for property tax before condo fees. And I earn a decent wage, you know, making slightly over $100,000 a year before tax. But even with those numbers, I’m still paying 50 plus percent of my income towards a mortgage and housing, which fundamentally doesn’t make sense. You know, it opens the question of does it make sense to continue living in Toronto, GTA, or even Ontario, for that matter, when there are much more affordable markets elsewhere in the age of work from home and remote work. You know, I think there are other factors that have to go into that, such as proximity to close friends. You know, I’m 31 years old. Is it easy for me to rebuild a network in a new city? Yes, I may have a home. Great. But do I have the social network that I would get in Toronto? The other side of the coin is there are lots of people who’ve, like I said, had the ability to leverage up their first condo or their first home into a larger home. So they have not only cash for a down payment, but they have huge equity that they’ve appreciated in this market. And while I’ve done well in the equity market, it certainly hasn’t appreciated a 30-plus percent year over year for ten years.

ROB: Cody’s peers who bought condos in the early 20′s have a clear leg up, but Cody wasn’t ready to buy a home fresh out of university.

CODY: Yeah, of course, hindsight’s always 2020, but when I look back on it, I think my comfort level and risk tolerance at the time, I pROB: ably would have ended up exactly where I am today. You know, I could have bought a $300,000 condo with a much lower down payment back in the day. But my job, I was a new grad. I didn’t have the same job security feeling that I have today. I haven’t established myself professionally. And, you know, $300,000 when you’re making 50 grand a year is a different equation than $700,000 plus you’re making slightly over 100. The cash, you know, commitment is certainly higher, and it’s a number you need to stomach. But I think overall, I feel somewhat isolated as a potentially rational actor in a very irrational market.

ROB: Even with his savings, he doesn’t plan to participate in the market right now.

CODY: I mean, notwithstanding a huge cash influx that’s unexpected into my life, I think, for lack of a better term, I’ve given up on the short-term goal of homeownership in the GTA. Toronto, even Ontario, for that matter. I think it’s just fundamentally not going to meet my desires with my ability to pay for it. And that’s why I don’t think my desire is completely unrealistic for the average person. I think, you know, wanting a safe, clean home that you can call your own is not something that should be unattainable for the vast majority of people. I think everyone deserves quality housing that they can hopefully call their own changes they need, right? Like, I have no problem with renting. I think renting makes a lot of sense for a lot of people and content to continue to make sense for a lot of people across all income brackets. But for me, there’s a certain level of pride of ownership that I want and I crave. I crave the ability to paint a wall without asking for permission, or I want to renovate a kitchen myself. Great. I want to be able to do that. Those are the kind of things that you can’t get in a rental environment. I mean, I’ve given up on that dream. The road to get there is no longer clear.

ROB: For now, he’s living with his parents.

CODY: So it was a COVID-related move. And it’s been relatively consistent because of the value that they’re, you know, my parents are obviously very generous and supportive, but it’s enabled further saving. But again, I kind of go back to the point around, is that even worth it? Is my rate of savings going to exceed the rate and growth in the market price? And realistically, the answer has been for the last five years. No, it hasn’t. Like, it’s fundamentally hard for people my age with a relatively stable and strong income to even get ahead of the increases in this market. So back to the risk equation of yesteryear, it does or has made sense in hindsight to have been over levered, you know, in 2010 on a mortgage because of the appreciation alone that a $300,000 condo is now going for $700,000? So even though it was a stretch back then, assuming you’ve had, you know, decent wage growth over the last ten years and the property appreciating, it’s you now have a bulk of equity that can be rolled over into a new property or a downsized property, a more rural property, a non-Ontario property, etc.

ROB: Moving forward, Cody is open to leaving the Toronto area.

CODY: I think I had it in my head that I wanted a safe, clean, energy-efficient home. But does that mean a detached home with a backyard and trees and that kind of thing for a long-term lifestyle to grow a family into? Or is it shifted into, you know, what a condo works for now because it’s close to others, social life, friends, proximity to downtown life? But on the flip side of that, it’s been more of an interest of mine as of late to seek a more rural property, a land perhaps, and do something small, even if it’s a build or renovation on a property. But even broadly outside, the GTA still has relatively high property values. I mean, I’ve heard it on your podcast before that even places as far north as Bury are still unattainable for the average millennial, and it really opened the mindset for me to be like, okay, well, what about out East? I was fortunate enough to go visit out East over New Year’s this year, and it was even crazy for me to see the pricing in Halifax. I just kind of wrote off B.C. as unaffordable and unattainable for obvious reasons. It’s basically like the GTA. And then you look at places like Calgary or Edmonton; there’s a lot more affordability around there, but it’s basically forced me to reevaluate my desires. I think I can achieve a desire now. Sure. Like, I can walk into a skybox, you know, studio, apartment and pay for it, but is it worth it to me? Does it make sense to do that versus renting it? You know, the answer has always been no. Otherwise, I would have done it.

ROB: In the short term, Cody plans to invest in the first-time homebuyer’s account and potentially rent in the city for now.

CODY: You know, I often think about the benefits of living in a city, especially as a young person who is career-oriented, career motivated. But I honestly have to say that after COVID, it really highlighted the fact that opportunity in a connected world is anywhere. It’s anywhere you make it. And it can be whether it’s remote work, you know, work from home, which has been massively beneficial for many folks. But it really boils down to you have to create the opportunities for yourself. I fundamentally believe that, and I think that I can create those opportunities from anywhere I am. For many folks, the city is the answer to that. The close proximity, the fuel on the fire. You know, I used to live in New York City as a consultant before moving back to Toronto. And it’s a different world, right? Even compared to Toronto, the energy in the city is vastly different. The demands on work are vastly different, and being more open to living outside of the GTA or Toronto is partly fueled by the economic demands and my desires but also by the idea that I can continue that lifestyle remotely or, you know, at a different place. It doesn’t necessarily need to be Toronto, and I think that’s maybe a little bit of a viewpoint that’s shared across Canada outside of the GTA Canada is not just Toronto, and I think that there’s a lot of economic opportunity that exists outside of Toronto. And I encourage, you know, your listeners to pursue those opportunities because, at the end of the day, further concentration in that market is not going to solve our problem.

ROB: After the break, we’ll hear from our next guest on the West Coast.

RYAN: Yeah. So my name is Ryan. I’m 37 years old, and I live in Victoria, British Columbia.

ROMA: After finishing law school, Ryan lived in Toronto. Then in 2019, he moved west.

RYAN: I just sort of decided, you know, looking at my future and what the next 20, 30 years of my life would look like, it just didn’t feel like it was feasible or possible to sort of stay in Toronto or even the GTA long term. I found this job, which is actually why I went to law school in the first place. I didn’t think I would ever be able to find it. I found it out here in Victoria, and, you know, the lifestyle just seemed to suit me better. Things seemed a bit more affordable in 2019. It seemed like I could build that life that I wouldn’t be able to have in Toronto in the GTA. So that’s why I moved out.

ROMA: Ryan’s financial situation isn’t complicated. He has an RRSP, an emergency fund, a savings account for Trips, and student loan payments.

RYAN: To go to law school. I took out a line of credit, you know, took on a significant amount of debt. I am someone who, you know, I’ve worked pretty much my entire life. I’ve worked and had jobs in high school. You know, I worked through undergrad, I worked, I did a master’s degree. I worked through that. When I went to law school, it was about $16,500 a year in tuition. You know, by the time I graduated, it was over 18. So, you know, to finance that on a summer job and a part-time job is just impossible.

ROMA: Ryan sets aside about a quarter of his take-home pay for savings and investments. Still, he doubts he’ll ever own a home.

RYAN: I was just kind of, you know, from time to time, I’ll look in and see sort of is it even possible to dream about homeownership. You know, I think for me, ideally, I would love it if I was ever able to just own a townhouse. I don’t need anything bigger, just something simple. But looking at the costs here. A townhouse will go for $700,000. You know, basically what that means is, is at this point. So today, where I was to do it, it would be, you know, 20% down payment is $140,000. At the rate that I’m able to save as much as I’m able to put aside, I will never have $140,000 to invest, maybe in 20 years. At that point, I’ll be 57. I don’t think it’s financially responsible for taking on a mortgage at 57 when I’m, you know, eight or possibly eight years out from retirement. Fingers crossed. So, you know, you may as well tell me you’re going to save 2 million. And when I moved here, it wasn’t $700,000, so it was a little more reasonable. And maybe I could foresee in a period of time I could come up with that kind of money. But, you know, that yardstick just keeps shifting and shifting. So today it’s $140,000. Two years from now, it might be 180. And so it just feels like I’ll never be in a position to sort of be able to set that type of money aside.

ROMA: He also isn’t comfortable making big monthly mortgage payments. Let’s say he bought that $700,000 townhouse. His monthly costs would be about $4,000. Right now, his rent is roughly 1300 a month.

RYAN: I think, ultimately, I would be more comfortable spending about a quarter of my take home or my income either way. Maybe 30%. I just don’t think I would feel comfortable spending more than that because I think it would it would be impossible to save for, you know, if I ever get sick, if I ever need to have surgery, I need to take six months off work for something unforeseen if I am ever able to retire. Being able to afford that, people might disagree. But you know, you have one life, and I don’t want to spend it being house poor. I don’t want to spend it going head to mouth every week. You know, I feel like I got to a point where I can set aside some money in the savings account. And I’m really reluctant to go back to living week to week. I would say I’m reluctant to put all my eggs in the housing basket. I mean, I’ve looked at different places. You know, I’ve looked at condos in town. And for what you’re paying, you’re not getting more than what I currently have.

ROMA: Victoria is less affordable than it was when Ryan moved there in 2019, but he has no plans to head back east. He loves the island life and the community there, even if he remains a renter.

RYAN: I’m very convinced that this isn’t going to change. I don’t think the cost of housing is ever going to go down. I think that the housing sector is the biggest in Canada, and increasingly so people are getting themselves, you know, making their house poorer in order to be able to save for their retirement. I just don’t ever see the costs coming down. I don’t know how it’s ever going to you know, I am frustrated by that because, you know, I feel like I’ve worked my entire life. And, you know, you want to be able to have some certainty around how you’re going to retire and the places you’re going to live. And being a renter is precarious. I live in an older building, and someday they might decide they’re going to bulldoze it and build condos over it. Know? And then what? Then I’m in the housing market. In a rental market where, you know, I’m going to be asked to pay almost twice what I’m paying now in rent. And so, yeah, I just don’t. Maybe in a generation, maybe. As with most things, I think millennials have experience. We’re going to be a generation that misses out on a lot of the things that our parents and grandparents had available to them, marrying later. We’re not at all having kids or not at all later, buying homes or not at all, or even retiring or not at all.

ROMA: So what will he do with all the money he’s saved?

RYAN: You know, I’m just setting aside money into an RRSP, just saving what I can and hoping, you know, fingers crossed that, you know, the market doesn’t completely tank and take my retirement savings with that as well. But alternatively, I think, at this point, just kind of accept that housing isn’t a reality. And you know, other than saving, just sort of focusing on, you know, traveling and other things, it’s sort of a little more enriching and the alternative to having that stability. Again, it’s me. And third, there are other friends of mine who are sort of in this position where 30 years ago, we would be able to afford houses in a suburb somewhere or even a condo downtown. You know, we have money, we have disposable income to spend. And so we can’t get to that next level. Like, we can’t go from where we are to being able to afford a home. So, you know, then what do we do then? We’re just sitting around on cash, more or less, so that we can use it otherwise.

ROMA: Still, he does sometimes check out those real estate listings.

RYAN: Oh, my. But it’s just like now it’s for comedic effect. Like, you just take a look at it and you’re like, All right, never mind. That’s good. I just won’t do that. That’ll just be another thing. And I’ve got a good life. I’m pROB: ably the happiest I’ve been in years. I’ve got a good job, a good life, and I’ve got a good community. And so it sucks that I can’t do those other things, but I’ll cope then. Yeah.

ROMA: Our guest today proved that the future of home ownership in Canada has never been more uncertain. We know we heard from three single people that the math is different for couples. Still, single households are a major demographic in Canada. And the voices we’ve heard document the frustration and resignation people are feeling. But we don’t want to leave you feeling hopeless. Rob, what are your takeaways?

ROB: One, you have more time than you think to buy a house. You can buy in your late thirties or even at 40 and still get your mortgage paid off ahead of retirement. That’s because a lot of today’s young workers will stay on the job past 65. Two. Your home buying power will improve over time. There will be raises and promotions ahead, which means you’ll make more money. Three. Lifelong renting is a challenge in expensive cities, but doable and even attractive of the freedom it offers. The rule of homeownership is that it’s always more expensive than renting, period. Use your renter’s savings to build wealth by investing.

ROMA: And somehow, that’s a wrap on our seventh season of Stress Test. Thank you for listening. This show was produced by Kyle Fulton and Emily Jackson. Our executive producer is Kiran Rana. Thank you. To Mike, Cody, and Ryan for joining us and sharing their stories.

ROB: You can find Stress Test wherever you listen to podcasts. If you like this episode, please give us a five-star rating and share it with your friends.

ROMA: Until next season, you can find us at the Globe and Mail dot com.

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