Millennials: Avocados or homes?

[undercoverbrother]

Originally Posted by blankall

I think a lot of people in this thread are speaking from the perspective of children lucky enough to be raised by hard working parents who were willing to make sacrifices.

Ironically enough, your comment speaks to the bigger issue here, which is social mobility. Your parents were able to come here as poor immigrants and were rewarded for their hard work. They've been able to pass that along to you.

Oddly, I think I was very lucky.

Do children who were raised by parents who were not able to or unwilling to help them have the same opportunities?

Not sure, I suspect not, but my parents didn't help me at all. Since I got my first job, in grade 7, I had to put money towards the house "rent" if you will. It continued on, the only exception was when I was in school.

You're also 45. You were lucky enough to avoid the madness going on and are likely actually profiting from it. Would you be in the same position you are in now if property prices were 4x what they were when you entered the market? If the cost of tuition was 4x? If your job prospects were a fraction?

Oddly, I might find myself back into this mess, but at least I am "in" the game. I should note I am only in the housing game thanks to my wife, a lady much smarter than I.

[Slava]

Originally Posted by CliffFletcher

New York pays more retired police than current police. Many counties and municipalities in rural Canada are so burdened with police and firefighter pensions that the government is essentially a mechanism for collecting taxes from residents and disbursing them to retired employees. They don't have the budget for anything else - including hiring new police or firefighters.

If there's anything Boomers have to answer for, it's the criminally-reckless pyramid scheme of the public pensions they've burdened succeeding generations with. With relentlessly increasing lifespans, it's absurd that public workers have been retiring with full pensions and benefits at 50 and 55.

When Locke sees this post he may have an orgasm!

[steve9981]

Nm

[Locke]

Originally Posted by CliffFletcher

New York pays more retired police than current police. Many counties and municipalities in rural Canada are so burdened with police and firefighter pensions that the government is essentially a mechanism for collecting taxes from residents and disbursing them to retired employees. They don't have the budget for anything else - including hiring new police or firefighters.

If there's anything Boomers have to answer for, it's the criminally-reckless pyramid scheme of the public pensions they've burdened succeeding generations with. With relentlessly increasing lifespans, it's absurd that public workers have been retiring with full pensions and benefits at 50 and 55.

Originally Posted by Slava

When Locke sees this post he may have an orgasm!

Oh I'm well aware of this information and the fact that Public Service Pensions are a Ponzi scheme that is rapidly running out of suckers.

[afc wimbledon]

Originally Posted by blankall

I think a lot of people in this thread are speaking from the perspective of children lucky enough to be raised by hard working parents who were willing to make sacrifices.

Ironically enough, your comment speaks to the bigger issue here, which is social mobility. Your parents were able to come here as poor immigrants and were rewarded for their hard work. They've been able to pass that along to you.

Do children who were raised by parents who were not able to or unwilling to help them have the same opportunities? You're also 45. You were lucky enough to avoid the madness going on and are likely actually profiting from it. Would you be in the same position you are in now if property prices were 4x what they were when you entered the market? If the cost of tuition was 4x? If your job prospects were a fraction?

I'm also far better off financially than my parents were at my age. I'm 36 and own a rental property in downtown Vancovuer. I also don't have children. My worry is about the society I live in and my ability to take the next steps forward though.

I got a suitcase and a 'you're 19 now piss off' from my mum, probably a good thing, not untypical for my generation and the UK.

[Fighting Banana Slug]

Originally Posted by blankall

Do children who were raised by parents who were not able to or unwilling to help them have the same opportunities? You're also 45. You were lucky enough to avoid the madness going on and are likely actually profiting from it. Would you be in the same position you are in now if property prices were 4x what they were when you entered the market? If the cost of tuition was 4x? If your job prospects were a fraction?

While I do feel the younger generation will have a more difficult time owning a home, is the situation described above really that much different than for other generations? The 4x price differential is probably about right. However, the same differential existed when I bought in the late 90's compared to when my parents bought in the late 60's. Parents bought a nice suburban home for $39k in 1969. Sounds crazy right? I bought a bungalow, more inner-city for $185k in 1998. Also sounds crazy, right? Potential home owners are now looking at around $750k for comparable homes. I can pretty much guarantee that a home buyer in 1969, 1998 and 2017 felt/feel the exact same way. "This is insane, it can't be sustainable. I'll be the guy that loses money on my home." Obviously it could happen if you are on the wrong side of a bubble, but overall, almost everyone feels that pain but gets through it.

[blankall]

Originally Posted by Fighting Banana Slug

While I do feel the younger generation will have a more difficult time owning a home, is the situation described above really that much different than for other generations? The 4x price differential is probably about right. However, the same differential existed when I bought in the late 90's compared to when my parents bought in the late 60's. Parents bought a nice suburban home for $39k in 1969. Sounds crazy right? I bought a bungalow, more inner-city for $185k in 1998. Also sounds crazy, right? Potential home owners are now looking at around $750k for comparable homes. I can pretty much guarantee that a home buyer in 1969, 1998 and 2017 felt/feel the exact same way. "This is insane, it can't be sustainable. I'll be the guy that loses money on my home." Obviously it could happen if you are on the wrong side of a bubble, but overall, almost everyone feels that pain but gets through it.

Yes things are different.

Basics like rent and food are more expensive. It's indisputable that people spend a much higher proportion of incomes on rent now than they did 20 years ago.

The cost of tuition is higher, and the benefit received from education is lower.

As far as housing goes, when you compare the cost of a house to the average salary of a middle class person, the difference is astronomical. It's not just natural inflation as you are describing. While the price of the home between 1998 and now may have increased 4x, the salaries have not.

So basically, what people are describing as hard times for previous generations, have now been magnified many times. Yes the answer seems to be work harder and enjoy your life less.

[blankall]

Originally Posted by afc wimbledon

I got a suitcase and a 'you're 19 now piss off' from my mum, probably a good thing, not untypical for my generation and the UK.

If rent had been several times higher in relation to the salary you earned, would it have been more difficult to achieve your accomplishments?

[Fighting Banana Slug]

Originally Posted by blankall

Yes things are different.

Basics like rent and food are more expensive. It's indisputable that people spend a much higher proportion of incomes on rent now than they did 20 years ago.

The cost of tuition is higher, and the benefit received from education is lower.

As far as housing goes, when you compare the cost of a house to the average salary of a middle class person, the difference is astronomical. It's not just natural inflation as you are describing. While the price of the home between 1998 and now may have increased 4x, the salaries have not.

So basically, what people are describing as hard times for previous generations, have now been magnified many times. Yes the answer seems to be work harder and enjoy your life less.

While the prices have outpaced income, that isn't the entire story. Still need to factor in interest rates and fiscal policies. A bit of an apples to oranges situation, but I do stand by the assertion that likely every generation post WW2 have felt the same way as you.

Here is a link to an article that I found interesting. I don't totally agree with the sustainability of interest rates, but it is a very important factor that seems to be missing from much of this analysis.
http://business.financialpost.com/pe...n-30-years-ago

[opendoor]

Originally Posted by Fighting Banana Slug

While I do feel the younger generation will have a more difficult time owning a home, is the situation described above really that much different than for other generations? The 4x price differential is probably about right. However, the same differential existed when I bought in the late 90's compared to when my parents bought in the late 60's. Parents bought a nice suburban home for $39k in 1969. Sounds crazy right? I bought a bungalow, more inner-city for $185k in 1998. Also sounds crazy, right? Potential home owners are now looking at around $750k for comparable homes. I can pretty much guarantee that a home buyer in 1969, 1998 and 2017 felt/feel the exact same way. "This is insane, it can't be sustainable. I'll be the guy that loses money on my home." Obviously it could happen if you are on the wrong side of a bubble, but overall, almost everyone feels that pain but gets through it.

Actually your example proves the opposite given that you're comparing a 29 year period with extremely high inflation to a 19 year period with low inflation. $39K in 1969 was equivalent to $184K in 1998 dollars, so those prices are dead on. On the other hand, $185K in 1998 dollars is equivalent to $264K today so the $750K example is nearly 3 times more expensive after accounting for inflation.

[blankall]

Originally Posted by Fighting Banana Slug

While the prices have outpaced income, that isn't the entire story. Still need to factor in interest rates and fiscal policies. A bit of an apples to oranges situation, but I do stand by the assertion that likely every generation post WW2 have felt the same way as you.

Here is a link to an article that I found interesting. I don't totally agree with the sustainability of interest rates, but it is a very important factor that seems to be missing from much of this analysis.
http://business.financialpost.com/pe...n-30-years-ago

This article was from over 2 years ago. Since then housing prices have increased dramatically. Up about 60-70% in Toronto. If we could somehow rewind housing prices by 2 years without devastating the economy, I'd be more inclined to agree with you.

The article also uses 1985 as a reference point. 1985 was at the very lowest point of our last housing crash, and a point where the government was purposely making it difficult to borrow capital. So basically, 2 years ago things were very comparable to one of the most historically difficult times to buy housing in Canada's history.

Now that prices have risen another 60-70% where's the comparable? It doesn't exist. This is a situation that has no comparables in Canadian history. The younger generation is faced with a situation without any comparable. Let that sink in.

[blankall]

^^^^^^^^^^^^

To add to the above, the high interest rates in the early 1980s, was the government's response to inflation. The government made it purposely difficult to borrow capital to curve inflation. These were the highest interest rates in Canadian history. Prior to the present boom, this was one of the hardest times to purchase a home in Canadian history.

This time inflation is occurring, but the government is doing nothing to stop it. Fixed salaries have been cut down dramatically in value. So this extends far beyond housing prices. Unless you have capital to begin with or are in a position to increase your own salary to compensate for inflation, you have it very hard right now. There is no way around that.

[Enoch Root]

nm, didn't see the article

[Jason14h]

This time inflation is occurring, but the government is doing nothing to stop it. Fixed salaries have been cut down dramatically in value. So this extends far beyond housing prices. Unless you have capital to begin with or are in a position to increase your own salary to compensate for inflation, you have it very hard right now. There is no way around that.

This is why it is so important for young people to start saving and making hard decisions with money and investing at a young age. Have some capital available when they are 25.

Going to our Avacado example, cutting out $10 in Starbucks and Avacado's a day and invsting/saving from the age of 18 until 25, at a RoR of 7% would yield $40K by age 25. Theres the house down payment.

The problem is people don't save, and then at 30 will have a very difficult time.

[Fighting Banana Slug]

I am honestly surprised how little inflation there has been in the last 20 years. I stand corrected in the comparison from 1998 to 2017.

But I would like to address a couple of your last points. Pointing out 60-70% price increases in Toronto isn't really relevant (unless you live in Toronto, so sorry if you do, for multiple reasons). That is terrible if you are trying to buy there, but it can't be sustainable. If it stays at 30%+ per year, you are correct, no generation has faced that.
Your second point is "inflation is occurring, but the government is doing nothing to stop it". The same inflation calculator to disprove my earlier point indicates that inflation as a whole is give or take 1.5% for the last 10 years or so. If you are talking about the housing market specifically, yes, we could raise rates dramatically, but I don't think that would lead to a better place for many. House prices would go down, though.

[peter12]

Originally Posted by Jason14h

This is why it is so important for young people to start saving and making hard decisions with money and investing at a young age. Have some capital available when they are 25.

Going to our Avacado example, cutting out $10 in Starbucks and Avacado's a day and invsting/saving from the age of 18 until 25, at a RoR of 7% would yield $40K by age 25. Theres the house down payment.

The problem is people don't save, and then at 30 will have a very difficult time.

Hahaha, sorry, where are you getting a RoR of 7%?? And which one bedroom apartment can I buy with a $40K down payment?

[Enoch Root]

Originally Posted by blankall

This article was from over 2 years ago. Since then housing prices have increased dramatically. Up about 60-70% in Toronto. If we could somehow rewind housing prices by 2 years without devastating the economy, I'd be more inclined to agree with you.

The article also uses 1985 as a reference point. 1985 was at the very lowest point of our last housing crash, and a point where the government was purposely making it difficult to borrow capital. So basically, 2 years ago things were very comparable to one of the most historically difficult times to buy housing in Canada's history.

Now that prices have risen another 60-70% where's the comparable? It doesn't exist. This is a situation that has no comparables in Canadian history. The younger generation is faced with a situation without any comparable. Let that sink in.

1985 wasn't even close to the worst. In 1981, mortgage rates broke through 20%. Thousands of people simply walked away from their homes because they couldn't afford the renewal.

Let that sink in.

[Enoch Root]

Originally Posted by peter12

Hahaha, sorry, where are you getting a RoR of 7%?? And which one bedroom apartment can I buy with a $40K down payment?

If you're not getting an RoR of 7%, you might need a better advisor. Or an advisor period.

[peter12]

Originally Posted by Enoch Root

1985 wasn't even close to the worst. In 1981, mortgage rates broke through 20%. Thousands of people simply walked away from their homes because they couldn't afford the renewal.

Let that sink in.

Yeah, there were some rough times, for sure. No one is arguing otherwise, but in the aggregate things are much harder now for people under 35. That actually cannot be disputed, yet you keep trying with random anecdotes about places, times, and people that don't really exist in the real world.

[peter12]

Originally Posted by Enoch Root

If you're not getting an RoR of 7%, you might need a better advisor. Or an advisor period.

Show me where you can get a RoR of 7% on your TFSA or RRSP.