To all the aspiring home buyers who want prices to drop: at what point will you feel comfortable getting into the market?
The average resale home price across Canada has fallen from its March peak, which is great news for young adults struggling to build down payments and afford monthly mortgage payments. But a recent question from a reader offers some insight into the quandary buyers can find themselves in as they watch prices fall lower.
“My 29-year-old daughter has enough for a down payment on a condo in the Greater Toronto Area and can handle the payments associated with it,” this reader wrote. “Is it worth purchasing now or waiting for home prices to hopefully drop in the near future?”
Here’s a question to ask if you or a family member are wondering whether to buy a home now or wait for lower prices: would you feel worse if you bought now and the price of your home fell, or if you waited and prices ended up climbing instead of falling as expected?
Housing is tough to predict right now. The market has definitely cooled from the fever pitch of the spring, but could easily pick up again when immigration fully resumes and the economy hits its stride. Measures promised by the new federal government to improve housing affordability could also help stimulate sales.
Something else to consider is the potential for mortgage rates to climb from today’s ultralow levels. The benefits of a lower price on a home can be wiped out if you have to pay a higher mortgage rate. Yields in the bond market set the tone for mortgages and they’ve been rising lately.
A strategy for buying a condo now: find a unit you really like and want to live in for at least five years, and try my Real Life Ratio to make sure you can afford it. Make your payments, build your equity and live your life.
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Rob’s personal finance reading list
How much is food inflation?
My wife was surprised at the cost of butter on a recent grocery run. Turns out butter is just one of many food products that, according to one source, are rising more in price than we’re seeing in the official inflation numbers.
Stop buying plastic wrap
Bee’s Wrap is a sustainable food wrap that can substitute for plastic wrap and foil. Save money, generate less garbage. Here’s a review of how well it works from CNN.
An investor says no to paying brokerage commissions
A blogger called The Dividend Girl on how she switched her investment accounts to National Bank Direct Brokerage as a result of the broker’s recent move to eliminate commissions for trading stocks and exchange-traded funds.
The cheesier, crisper grilled cheese
I have eaten maybe three grilled cheese sandwiches in my life, but my sense is that most people like them. Here are some tips on how to make a better grilled cheese, presented to help you get the best value for your grocery spending and maybe sub an at-home meal for something pricier from a restaurant.
Ask Rob
Q: Teens are allowed to open an investment account in the United States with specific online brokerages. Why is it taking Canada longer to allow teens to open up their own investment account? My 16-year-old daughter works. She would like to invest.
A: I haven’t yet seen any push for brokers in Canada to offer investment accounts. Some parents are opening accounts in their own name and working as a team with their teens to manage them or allowing the teens to do all the investing. Here’s a recent column I wrote on some financial lessons for teens that are more important than how to trade stocks.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Paycheque project: We want to hear from you
The Globe is looking for young adults to participate in our paycheque profile series. It’s a look at how young adults in Canada are spending their monthly paycheque, how they pay for housing, food, transportation, family stuff and, yes, for fun. No judgment, just the facts. Here’s a recent profile of two renters earning $65,000 who opened a trading account right when the pandemic started. If you want to share your story, contact Globe personal finance editor Roma Luciw at rluciw@globeandmail.com.
Today’s financial tool
The human resources consulting firm Robert Half has created a guide to projected starting salaries in a wide range of jobs and cities. Lots of people are on the move in the workforce these days – here’s some guidance on how much you should be making.
The money-free zone
A really good song often generates some worthwhile covers. Here’s Some Misunderstanding by Gene Clark, with versions by Erin Rae and Soulsavers. Now for Marissa Nadler’s I Can’t Listen to Gene Clark Anymore.
Tweet of the week
Ramit Sethi, a top personal finance voice in the U.S., explains why he’s not in favour of teaching kids personal finance in high school.
ICYMI
What I’ve been writing about:
- New taxes, daycare and help for home buyers: How Liberal election promises will affect your finances
- If your home is your retirement plan, check out the latest news on reverse mortgages
- A how-to guide for dividend investors in a fast-falling market
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