Your parents likely made a mint off housing, but you won’t

By Rob Carrick

Housing prices in some cities have risen way above incomes for years, and the result is a market that is increasingly unaffordable for first-time buyers. The housing-industrial complex — banks, realtors and such — must be getting nervous about this. In the past few days, I’ve seen a number of media releases trying to pump up the market for millennial home buying.

Here’s RE/MAX with a survey claiming that almost 80 per cent of millennials agree . And here’s Royal Bank of Canada with survey results showing in the number of 18- to 24-year-olds who are considering the purchase of a house in the next two years — a jump from 34 per cent in 2015 to 43 per cent this year. Our is that home ownership is the number one financial concern of young adults today, just ahead of retirement.

In this recent column, I looked at one millennial couple that a house. Now for the young adults who want to buy, but can’t really afford it. Here are four thoughts to cool their house lust.

1.) Your house will not be an investment: There’s simply not that much more room for houses to rise in price before they become unaffordable enough to curb demand. Expect long-term price appreciation in line with the inflation rate

2.) Forget about your restaurant and bar lifestyle: The cost of owning can soak up a lot of the cash you used to socialize with friends.

3.) Forget about travel: Unless a long weekend at your in-laws’ cottage counts.

4.) Your parents have no idea: They’re pushing you to buy because they made out like bandits in housing. But there’s virtually no chance of a similar financial windfall for you.

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10 Replies to “Your parents likely made a mint off housing, but you won’t”

  1. If you want to get rich off property, buy a factory, not a house. And preferably one that mints bars of gold or builds iPhones.

  2. Rob may be right on this topic.

    A factor to consider is the parents of which he speaks of bought their homes 30+ years ago, so its hard to say with any accuracy what prices will be in 30+ years.

    One area I take issue with Rob’s article is the fourth point, “parents have no idea”. First off most parents don’t push their kids, and even if they did the kids would do what they want. The reason parents suggest housing of some sort is to establish themselves financially.

    What Rob overlooks is the cost of housing goes down once the mortgage is paid, and the asset is worth something. If they listen to Rob and presumably rent, it has been proven the difference will not be saved and invested. In the long run they will be worse off than if they purchased something affordable to their income.

    But they would have had the restaurant lifestyle with likely very little of a retirement plan and no home equity to look forward to. That is a recipe for disaster.

  3. Cannot go up any further? Perhaps but GTA (not sure about Vancouver) is the 4th largest city in North America? Something like that. How much does it cost to buy 2,000 sq feet of living space a 30 min commute from Manhattan or downtown San Fran etc. What about London or Paris.

  4. Loon-A-I bought and sold 7 homes/cottages and made money on all but one. I think you can still buy fixer uppers outside of Toronto ,Vancouver and our bigger cities and make good tax free money by living in the home for 5 years or so. Great way to make money and free up cash now and again. Trouble is with youngsters today they don’t want to buy the starter home. They want the monster home and monster mortgage. For bright young folks who want to progress through life …don’t compete with the Joneses…(righ­t away)

  5. Captain.Man, this guy is so anti-ownership its sickening. Where I am from, there is no way renting is cheaper than owning.

    *Fact – at the end of your mortgage term, you will own your property and your mortgage (rent) payment stops.
    *Fact – Some renters may increase their investments instead of renos/improveme­nts, but most don’t.
    *Fact – property taxes, condo fees, maintenance are all passed on to the renters anyways.
    *Fact – landlords don’t usually take a loss when they rent.

  6. I agree. I am 31 and I rent. I don’t see myself buying a house for investment purposes. There is just too many other and better opportunities to invest in.

  7. Anyone considering buying a house in the Vancouver or Toronto areas should first study up on the Dutch tulip bubble.

  8. Just-I can’t understand why so many people only seem to consider the amount a house will (or will not) go up in value. Whether your house goes up in price, goes down, or stays the same, the single most important reason for investing in a home is so that you can eventually STOP PAYING RENT!

    What on earth do those people that tout renting over owning plan to do in their retirement? If you’re in your 30’s today you can expect rents to be in the neighbourhood of $4,000+ by the time you retire. With no income other than a meager pension and CPP how do you think you will afford rent? And what happens when your landlord gives you an eviction notice when you’re 79 because he wants to renovate. 2 months notice – that’s all you get.

    So stop with the meaningless debating about whether house prices will go up or down. You buy a home so that eventually, after 20 years or so, you’ll own that home. And you’ll have a place to live when you’re retired, so you don’t end up homeless. That’s the real motivation for owning, so get on it folks.

  9. “Your parents likely made a mint…”
    It depends entirely on which part of the country or city you live, and when you buy or sell. Even in Vancouver I know of places where the return on new construction over the last 25 years has been less than 2% a year. In the nineties the prices were flat or declining.
    The statement above is only a generalization and oversimplificat­ion. In many cases investing in financial markets would have provided better returns.

  10. S The fact is the vast majority of boomers didn’t buy a home for an investment, they purchased it to live in, raise a family and enjoy their lives. No reason for any generation not to do the same. Up or down if value matters little. With a sub 3% interest rate just pay the darn mortgage off in 20 years or less and then live “rent free”, knowing you can paint your walls any color You like, allow the kids to doodle on the wall if that’s their thing, enjoy the neighbors, backyard, and parks. Anyone who has followed Rob’s advice over the past decade has been poorer for it – likely not just because the average home has increased in value, but many want to own a home for the pleasure it brings and the security it offers over time. You cannot, as far as I’m aware, live in your CN shares!

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