2012 vs 1984: Young adults really do have it harder today

[shermanator]

I've been noticing this article shared on my Facebook feed and thought this would be an interesting source of discussion (although I worry that it will turn into a pissing match being various age groups). What are everyone's thoughts on this? Is today's late 20's / early 30's generation worse off financially?

I'm 28, and I consider myself lucky as I had my education paid for. As a result I saved for a condo and was able to put a 20% down payment down (with some help from my parents, who have since been paid back). However, the average house price is about 8 times my annual income. As a comparison, my father was able to support himself, my mother, and 3 kids on a single income 25 years ago.

http://www.theglobeandmail.com/globe...+Article+Links

[mrkajz44]

Good article as it doesn't tell only one side of the story. It considers inflation and also touches on the massive differences between interest rates when considering the afordability of homes.

All in all though, it does seem like young adults have it a little bit rougher these days. The home ownership issue is really the big factor in my opinion, everything else isn't that bad.

[DownhillGoat]

He's probably not off the mark, but some of the math in the article is definitely skewed or omitted to prove the point. He shows 1984/2012 inflation adjusted/2012 actual home prices for each metropolitan area, but only shows the national average for salary.

Also, aren't vehicles today more affordable than they ever were from an annual salary ratio standpoint?

That being said, getting into the housing market is ridiculous now.

[shermanator]

Originally Posted by mrkajz44

Good article as it doesn't tell only one side of the story. It considers inflation and also touches on the massive differences between interest rates when considering the afordability of homes.

All in all though, it does seem like young adults have it a little bit rougher these days. The home ownership issue is really the big factor in my opinion, everything else isn't that bad.

Agree that home ownership is the biggest factor in the perception that our generation is getting an unfair shake. But also the thought of how much we need to put away for retirement just seems staggering.

I'm ballparking having to save $1.5 million to support myself, and my current savings plan won't come close to getting that amount put away.

[burn_this_city]

I'm 28 and compared to my parents I have it easier. I believe it really depends on if the previous generation gave you a leg up to start with. My folks came from lower middle class families, paid their own way through school and moved out west for jobs. I came from a middle class family, and didn't have to pay for education or move across the country for work.

Another part of it is life choices people make. People who gravitated towards careers that they considered enjoyable, probably make a trade-off with regards to financial stability. It probably also depends where you are trying to enter the workforce. It's much easier to find a steady well paying job in Alberta than it is in Ontario or Quebec. Folks my age out east probably have it worse than their parents because the economic conditions are much worse than they were then.

[Vulcan]

He forgets that mortgage rates were around 17% or more in 1984 and if you were in Calgary, it was the height of the recession. If you had a decent job things were good but a lot people were moving out or scrambling to hang on.

[wireframe]

Phew. I can use this as an excuse when my parents ask me why I still live with them.

[VO #23]

Originally Posted by mrkajz44

Good article as it doesn't tell only one side of the story. It considers inflation and also touches on the massive differences between interest rates when considering the afordability of homes.

All in all though, it does seem like young adults have it a little bit rougher these days. The home ownership issue is really the big factor in my opinion, everything else isn't that bad.

Home ownership + education that takes longer and costs more = massive amounts of personal debt. This isn't even factoring in the opportunity cost of studying for 4+ years.

[GP_Matt]

I had quite a few issues with his article. The big one for me was his take on paying for school. He uses 12 weeks instead of 16 for some reason and uses minimum wage at 40 hours a week. Many students work in their fields in the summer making more than minimum wage and many get more than 40 hours a week. He also doesn't account for working during the school year.
I graduated a few years ago but in the age of easy credit it was pretty simple to buy a house 10 months after graduation. I did move to find work the day after my last final though which may have helped.

He also used sole income when many purchasers buy a home jointly. Many single people will also buy a house and rent rooms to their friends or take on roommates. You can use rental income to help qualify.

[MyFlamesFirst]

Doesn't help that we live in Calgary AB. If your not in on the oil and gas money it can be hard goings.

[ranchlandsselling]

I was discussing this with my GF and father the other day. She knows what we make as a household. My dad supported wife and 4 kids. Was taking about his salary back in the day 1980 when he moved to Alberta. My girlfriend thought we make much more than that they (my parents) pulled it off (pressure mounting for wedding and kids). I pulled out a quick inflation calculator and discovered that the starting salary my father got in 1980 would be the equivalent of 390k today. They bought a house, sold said house for $1.0 in the early 1980s, bought another bigger house (needed space) and had a hard time getting by for awhile. He obviously changed jobs and didn't maintain that salary. But he still must have been making a lot, and it was tough.

I can't father paying for kids and a different house and school and sports and . . . Vomit.

I think it's tougher these days. But the credit is cheaper. It's easier to live above our parents standards. But one day someone is going to have to pay.

Also computers weren't $400.00 back then.
TV's weren't $500
We didn't eat out, food was more expensive I believe. There was no costco, walmart, home depot, rona, lowes.

[SHOGUN]

Compared to other countries excluding some European countries, I'd say Canada has it pretty good significantly.

[T@T]

Originally Posted by shermanator

2012 vs 1984: Young adults really do have it harder today

No they don't, It's just most have bought into the 2012 end of the earth theory!

[3 Justin 3]

For me the hardest part will be dealing with a home. My parents never had the chance for a post-secondary education (mine is pretty much paid for by them), my parents also moved out of their parents house at 16 and 18, I'm still living with them at 21 (22 in 2 weeks).

I'd say I have it pretty damn good. Though buying a house will be tough, the prices are rather high.

[Raekwon]

Originally Posted by Vulcan

He forgets that mortgage rates were around 17% or more in 1984 and if you were in Calgary, it was the height of the recession. If you had a decent job things were good but a lot people were moving out or scrambling to hang on.

"Not everything is more expensive for today’s young adults – mortgage rates were in double digits back in 1984 (but then again so were savings rates)"

[FlamesAddiction]

I have pretty much accepted that I will likely never own a home and will probably never buy a new car right off the lot. I will be about 42 by the time I pay off my student loans and then I can start thinking about saving money for retirement.

I don't understand why some older people can't acknowledge that the younger generation is worse off. I think part of the reason is that even though necessities like homes, education, energy, food, transportation and fuel have the younger generation selling their souls, many "lifestyle" things have become cheaper and better (things like travelling, electronics/luxury items). As much as I complain about the price of airfare to Europe now, it was crazy expensive to my father's generation. To many older people, it makes the younger generation look like a bunch of playboys since "fun" things are more accessible and cheaper on comparison.

[GP_Matt]

Originally Posted by ranchlandsselling

I was discussing this with my GF and father the other day. She knows what we make as a household. My dad supported wife and 4 kids. Was taking about his salary back in the day 1980 when he moved to Alberta. My girlfriend thought we make much more than that they (my parents) pulled it off (pressure mounting for wedding and kids). I pulled out a quick inflation calculator and discovered that the starting salary my father got in 1980 would be the equivalent of 390k today. They bought a house, sold said house for $1.0 in the early 1980s, bought another bigger house (needed space) and had a hard time getting by for awhile. He obviously changed jobs and didn't maintain that salary. But he still must have been making a lot, and it was tough.

I can't father paying for kids and a different house and school and sports and . . . Vomit.

I think it's tougher these days. But the credit is cheaper. It's easier to live above our parents standards. But one day someone is going to have to pay.

Also computers weren't $400.00 back then.
TV's weren't $500
We didn't eat out, food was more expensive I believe. There was no costco, walmart, home depot, rona, lowes.

What was your father doing that he had a starting salary of $135000 in 1980? Also, that would have had him making 4.5 times more than the median income of the top 20% of earners in 1980, putting him solidly in the 1% group. If you are comparing yourself to him you may be setting your benchmark a bit too high.

[Hockeyguy15]

Honest question, would you rather spend $100,000 on a house with 19% interest or $400,000 at 4%? I know everyone gripes about how bad interest rates were back then but I think if I had the choice I would go with the 1980's option over today's option.

[Reaper]

Originally Posted by MyFlamesFirst

Doesn't help that we live in Calgary AB. If your not in on the oil and gas money it can be hard goings.

Exactly. I transitioned into O&G because my wife and I wanted to stay in Alberta.

[Maccalus]

Originally Posted by Hockeyguy15

Honest question, would you rather spend $100,000 on a house with 19% interest or $400,000 at 4%? I know everyone gripes about how bad interest rates were back then but I think if I had the choice I would go with the 1980's option over today's option.

The $100,000 house in the 1980s would likely get you a smaller house than the modern equivilent as average house sizes increased greatly over the 90's as the baby boomers advanced through their careers and credit started to become cheaper again.

Running the numbers, the difference of mortgage payments of a $100,000 mortgage at 19% and $400,000 mortgage at 4% is only about $560/month dollars amortized over 25 years. With the increase in wages between 1980 and now, the $400,000 mortgage is more affordable. This is all assuming that interest rates would stay consistant to these numbers over the long term, which is not a fair assumption to either case.