Millennials: Avocados or homes?

[GGG]

Also 5% down and dual income purchasers have both increased prices but also the ability to pay those prices. So the person today only needs 35k but also they should move out of Van or Toronto or wherever they are if the job they are in doesn't support the home ownership options they want.

[blankall]

Originally Posted by Enoch Root

One final problem to address: where, other than in Vancouver or Toronto, is $750,000 representative of a starter home?

Comparable homes, in normal areas, when factored for interest rates, are not 3 to 4 times more expensive, as you were originally presenting them to be.

At least not when compared to the late 70s or early 80s. The 90s? Sure. Because housing prices had been flat for a while and weren't all that expensive compared to other periods.

Again, I am not saying things aren't tough right now. But the dates used in the original post to this chain were random and didn't represent anything close to the worst times to buy.

As your numbers show, once mtge rates are factored in, the differences are quite a bit less than the headline price implies. Looking at the early 80s, and comparing starter home to starter home, it isn't as crazy as some people want to believe.

Lol...$750k does not get you a starter home in Vancouver or Toronto anymore...

You can buy an actual home on the street my parents bought their starter home for in Hawkwood Calgary for about $700k. The home is over 30 years old now, and falling apart. They got a brand new home. Every home on that street was filled with young parents in their 20s. They all had brand newly built houses.

[opendoor]

Originally Posted by Enoch Root

One final problem to address: where, other than in Vancouver or Toronto, is $750,000 representative of a starter home?

Comparable homes, in normal areas, when factored for interest rates, are not 3 to 4 times more expensive, as you were originally presenting them to be.

At least not when compared to the late 70s or early 80s. The 90s? Sure. Because housing prices had been flat for a while and weren't all that expensive compared to other periods.

Again, I am not saying things aren't tough right now. But the dates used in the original post to this chain were random and didn't represent anything close to the worst times to buy.

As your numbers show, once mtge rates are factored in, the differences are quite a bit less than the headline price implies. Looking at the early 80s, and comparing starter home to starter home, it isn't as crazy as some people want to believe.

I didn't come up with those numbers, they were real world examples from another poster talking about houses he and his parents bought. Feel free to provide your own that show that the current rate of affordability isn't completely out of whack though.

[opendoor]

Originally Posted by blankall

Lol...$750k does not get you a starter home in Vancouver or Toronto anymore...

You can buy an actual home on the street my parents bought their starter home for in Hawkwood Calgary for about $700k. The home is over 30 years old now, and falling apart. They got a brand new home. Every home on that street was filled with young parents in their 20s. They all had brand newly built houses.

Yeah, the same ratios apply in a lot of places. I have relatives who live on Vancouver Island. They bought a house in the mid '70s for ~$30K, their son bought a house in the same neighborhood in 2002 for $105K. Now those same houses (now 40+ years old) are worth $350-400K. Newer houses in the same area go for $450-500K.

Once again the mid '70s price and the price 25-30 years later is pretty much identical after accounting for inflation (both are ~$135K in today's dollars) while the current price is nearly 3 times as expensive.

[afc wimbledon]

Originally Posted by opendoor

Yeah, the same ratios apply in a lot of places. I have relatives who live on Vancouver Island. They bought a house in the mid '70s for ~$30K, their son bought a house in the same neighborhood in 2002 for $105K. Now those same houses (now 40+ years old) are worth $350-400K. Newer houses in the same area go for $450-500K.

Once again the mid '70s price and the price 25-30 years later is pretty much identical after accounting for inflation (both are ~$135K in today's dollars) while the current price is nearly 3 times as expensive.

But the cost of borrowing is all but free, which is what is actually inflating house prices

[Rutuu]

Originally Posted by Clever_Iggy

Interesting read. As I said in my follow up post, I am an inactive investor for the majority of my investment portfolio. The part that I do play with, my returns are more moderate and I would have been better just lumping it into the bulk of my investments.

My posts weren't meant to brag or take a side. It was more to point out my nativity on the matter and that my experience was different than another posters. Since we are dealing largely with anecdotal examples, I offered mine.

I wasn't having a go...If you're a passive investor and realize that your play money would've been better off in the index you're doing pretty well.

[Rutuu]

Originally Posted by peter12

If you are regularly beating bench-marks, then you are either a criminal or incredibly lucky.

For goodness sake, I have a CFA 1 and I work in marketing, and I know this stuff. I barely passed Grade 12 math, and I get that the law of averages applies for a reason.

Skip the ethics section?

Congrats for signing up.

[Slava]

What a train wreck this has turned into....

[HockeyIlliterate]

Originally Posted by Hockeyboy2

. . . people who know me would tell you I am NOT the smartest man in the room, but I am the most genuine and interesting.

Impossible.

He is:

[Enoch Root]

Originally Posted by opendoor

I didn't come up with those numbers, they were real world examples from another poster talking about houses he and his parents bought. Feel free to provide your own that show that the current rate of affordability isn't completely out of whack though.

I know you didn't. I didn't either. I have continuously referred to the early eighties. But there are so many different discussions and poor comparisons in this thread.

[GGG]

Originally Posted by opendoor

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.

I don't think its fair to compare the same property in the same city.

The city has changed. Buying a house in a 500k city is different than buying a house in a 1 million person city. The distance from the new housing stock greatly affects the price the person is willing to pay. Any comparison should really be done on new construction at the suburban edge of the city if you want apples to apples. As you can't expect a city to grow in size and not have higher property values the closer you are to downtown.

It would be like moving from Saskatoon to Calgary and expecting prices to remain the same.

[PepsiFree]

I don't know what any of you are talking about but near Mexico you can get like 10 avocados for a dollar.

Pretty much solves this whole thread, you're welcome.

[Locke]

Originally Posted by PepsiFree

I don't know what any of you are talking about but near Mexico you can get like 10 avocados for a dollar.

Pretty much solves this whole thread, you're welcome.

You're right, going to Mexico really does mostly solve the problem.

[Weitz]

Originally Posted by PepsiFree

I don't know what any of you are talking about but near Mexico you can get like 10 avocados for a dollar.

Pretty much solves this whole thread, you're welcome.

Yah, but how much is the bread??

[PepsiFree]

Originally Posted by Weitz

Yah, but how much is the bread??

Great point, just goes to show you have deep and varied this conversation is. Avocados, bread, so many costs to consider.

[kevman]

Originally Posted by GGG

I don't think its fair to compare the same property in the same city.

The city has changed. Buying a house in a 500k city is different than buying a house in a 1 million person city. The distance from the new housing stock greatly affects the price the person is willing to pay. Any comparison should really be done on new construction at the suburban edge of the city if you want apples to apples. As you can't expect a city to grow in size and not have higher property values the closer you are to downtown.

It would be like moving from Saskatoon to Calgary and expecting prices to remain the same.

This is a good point. So many other factors go into housing costs. You know where houses have remained relatively stable for the last few decades? Houston. Never mind the ring roads upon ring roads of sprawl and impending infrastructure maintenance disaster. (hidden costs)

People lobbied the government for easier home ownership 20 years ago. Next thing you know we ended up with 0% down 40 year mortgages. The market exploded and when everything settled out the same wealthy 2/3rds of Canadians could own.

Meanwhile in the last 30 years the population of Calgary has gone from 600k to 1.3 million. Go 30 years further back to 1956 and the population of Calgary was 180k. My buddy pays $1,300 US/month to rent a 200 sq. ft. studio a 30 minute train ride from Manhattan. You probably couldn't find a studio that small in Somerset but it sure as hell isn't going to cost you near that much. Simple supply and demand.

Your average post war bungalow built in the 50's was 1,000 sq. ft or so. What's an average suburban starter home? 1,800 sq. ft? Comparing apples to apples, starter homes on the edge of the city where the land is practically worthless, a modern home should cost double - it's twice the size.

So government intervention, rapid population growth and huge homes. Is it really a surprise that homes have gotten more expensive? Oh yeah, don't forget the easy access to free money.

[Fuzz]

Originally Posted by Weitz

Yah, but how much is the bread??

It's Mexico, you use tortillas. Perfect for your Instagram.

[DoubleF]

Originally Posted by HockeyIlliterate

Impossible.

He is:

I am now disappointed his name isn't Hockeyboy2X.

[Bill Bumface]

Originally Posted by Hockeyboy2

You have yourself a great day.

Oh Hockeyboy2, he's as smooth as he is handsome!

[topfiverecords]

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