Canadians 'drowning in debt': 47% will borrow to cover costs, survey says

[White Out 403]

Originally Posted by GirlySports

I think the low interest rates are giving this generation the false sense of security that a long mortgage is ok.

But the money saved from low interest rates isn't being saved or invested, it's being blown on the things we've talked about in this thread.

Again, the numbers simply don't back this up. I don't get this giant blind spot that baby boomers seem to have about the skyrocketing cost of education, housing, and food, that goes way beyond inflation. I don't know if you're a boomer, but your comments read like a really out-of-touch boomer with a FYGM attitude.

[GirlySports]

Ha I'm the opposite actually. I'm a younger person not blaming boomers but trying to analyze how my generation is in debt.

It's simply spending and lifestyle, as I've stated many times.

[redforever]

Originally Posted by The Fonz

Does it seriously cost 600k to buy a home in an undesirable area? I don’t live in Calgary.

As for my previous post, the point I was making is that it wasn’t so easy for Boomers to buy their 1st home either. They struggled much like the 25-35 year olds of today.

Not only that, but when we bought our first house, only the prime income earner was allowed to be used for determining mortgage eligibility. Our first mortgage was 9%.

[Scroopy Noopers]

Originally Posted by GirlySports

Ha I'm the opposite actually. I'm a younger person not blaming boomers but trying to analyze how my generation is in debt.

It's simply spending and lifestyle, as I've stated many times.

It’s not simply just those reasons. But they do play a large part.

I couldn’t count the amount of people in my graduating class who were taking a year off to travel. That has to be a fairly recent thing right? Compound that with coming back to pay high tuition and rent, you’re starting your 20’s off in a pretty big hole.

If I could go back in time and live at home 1 year after graduating, and work full time at some crap job to save for tuition, I’d be able to buy a mid level home by 30. But that sucks, who wants to do that.

[blankall]

Originally Posted by The Fonz

Does it seriously cost 600k to buy a home in an undesirable area? I don’t live in Calgary.

As for my previous post, the point I was making is that it wasn’t so easy for Boomers to buy their 1st home either. They struggled much like the 25-35 year olds of today.

It wasn't easy for boomers during that 2-3 years and then things began to adjust. My point is we are in that tough period, but there seems to be no adjustment coming.

Also household incomes, adjusted for inflation, are lower now, but the average family works for more hours. This doesn't take into account the rising costs of daycare and food.

It wasn't easy for the boomers during that massive recession. But the recession level tough times, would actually be a slight relief but today's standards.

Calgary may also be a bad example, as they probably have the least housing pressure in the country. They have an above average jobless rate, had a recent construction boom, unlimited surrounding land, and the population growth has slowed dramatically to about 1.4%.

So basically by your example, if you can find a job in Calgary, you can afford to buy a house at a comparable economics pressure to the hardest possible time the babyboomer generation experienced.

[GGG]

Originally Posted by blankall

Yes, but you never actually mortgaged 100% of the home.

You're also comparing the time just after a major crash, when the government was doing as much as possible to stop people from borrowing money.

So basically you're argument is that people now can buy a home in an undesirable area now, and the new norm for that is comparable to the worst time in Canadian history to mortgage a home.

In what way was the housing climate in 1980, just after the government jacked interest rates, considered positive. People complained non-stop about their inability to buy houses and it was a major national crisis.

In Calgary the median family income can afford the median SFH. I find it tough to see an affordability issue when that is the case.


As an aside I don’t think we give Gen Xers a hard enough time. I’m the tail end or the start of the millennials but bought a house a year too late. Gen X got to profit off the property increase along with being in higher earning jobs during the 2004-2014 oil boom rather than just starting careers.

[White Out 403]

Originally Posted by GirlySports

Ha I'm the opposite actually. I'm a younger person not blaming boomers but trying to analyze how my generation is in debt.

It's simply spending and lifestyle, as I've stated many times.

I'm curious what your thoughts are, and if you've already expressed them I apologize, on housing, food and education blowing way past inflation in the last several decades? Does that factor in to your analysis or is it strictly avacado toast to you?

[GirlySports]

As stated above, there was a housing boom in 2006 but has fairly held steady since. Calgary is the least housing pressure.

Education is a huge problem for me. how post secondary institutions have gouged this generation is pretty disgusting. Also the trend of more private schooling. The oversaturation of degrees is causing a dead end

Inflation, I'm not a economist to know why groceries are so expensive.

[opendoor]

Originally Posted by GirlySports

But the money saved from low interest rates isn't being saved or invested, it's being blown on the things we've talked about in this thread.

There are no savings from lower interest rates. The purchase price of housing has simply been driven higher to compensate for lower rates.

So it's true a person with an $80K mortgage in 1980 has a similar mortgage payment to person with a $600K mortgage now after accounting for inflation. But paying off your mortgage was vastly easier back then. My parents managed to pay off their house in 15 years just by devoting a fairly modest 5% of their more or less median income to extra payments. To pay off a similar house now in 15 years with a similar income would require putting aside over 20% of your pre-tax earnings.

[flamesfever]

Originally Posted by GirlySports

As stated above, there was a housing boom in 2006 but has fairly held steady since. Calgary is the least housing pressure.

Education is a huge problem for me. how post secondary institutions have gouged this generation is pretty disgusting. Also the trend of more private schooling. The oversaturation of degrees is causing a dead end

Inflation, I'm not a economist to know why groceries are so expensive.

Purchasing a house is all about timing. There is usually a time to rent and a time to buy. Until we get a federal government that exercises their power to get pipelines built, I think it will be a time to rent and save until things start turning around. If you can find a job, moving to a small town, where house prices are considerably lower, may also be a consideration for some.

As for education, with all the unemployed university grads, it may be worthwhile for some to consider a trade by going to a technical school e.g. SAIT.

As for rising grocery costs, I believe the cost of vegetables is contributing to most of the rise, while meat costs are fairly stable. It's definitely worthwhile purchasing at sales. I think the environmental movement and the emphasis on eating more vegetables at the expense of meat is also a contributing factor (FWIW I am ignoring it).

just my opinion

[DoubleF]

Originally Posted by The Fonz

Does it seriously cost 600k to buy a home in an undesirable area? I don’t live in Calgary.

As for my previous post, the point I was making is that it wasn’t so easy for Boomers to buy their 1st home either. They struggled much like the 25-35 year olds of today.

IMO $600K is not a realistic average home. $600K is a fricken nice and above average home. No one is living in squalor with a typical $400K home in this city and there's an amazing selection of well maintained condos between $200-300K that are in excellent locations due to oversupply right now.

$600K is more than enough to buy into something decent in the inner city, but you'd likely be sharing some walls for something relatively new or you're buying a detached fixer upper/an older home with a few refreshes done to it. Heck, you could buy around a 1300 sq ft townhouse in the inner city built around 3-8 years ago for around $450K. With that price point, you could probably access a crud ton of brand new condos downtown as well. I hear large two bedrooms condos built around 10-15 years ago in Renfew go for around the low to mid $350s.

$600K is enough to buy a brand new place in most new suburbs and a nice home with slightly lower spec in desirable neighborhoods. $600K will probably buy you 1.5 detached homes in a "less than desired neighborhood" in Calgary.


I'm a millennial myself. The serious inability for most people to understand what is necessity and luxury is one of the biggest reasons for their bemoaning of their debt load. I will agree with Girlysports that the demand for post secondary education is a legitimate problem. However, the fact you have a ton of individuals that do useless full degrees and aren't even getting decent grades in those useless degrees to go back out and work barely above minimum wage jobs is also making the problem worse.

Socially, the push for people to just do post secondary and figure out their future there is inappropriate. I've seen enough friends go from high school, work 2-3 years minimum wage/blue collar and then go to post secondary and flourish because they know exactly what they want to learn and are fully focused on learning while in school. Then there's a ton of those individuals that spend 5-10 years in school just schooling/playing and never really wanting to be there minus partying with people. That's a serious waste of time and resources. I do want to mention that one of the things I really appreciate about Calgary is the overall mutual respect of blue collar and white collar. Most cities are blue vs white or vice versa.

I know someone who dropped out of school and went to work the rigs to be the sole bread winner due to unfortunate family circumstances. 3 years later he had amassed enough to provide for his family, had a car and home paid off and significant savings. He came back then got an engineering degree. This is what O&G is capable of affording us, but more often than not, we hear stories about how most people are the "working poor". That's kinda messed up.

The majority of people are in debt because they aren't financially responsible. Full stop. This isn't like many other countries. We don't have the many major expenses that aren't covered by the government that force us to live with unforeseen major debt loads. Most debt loads in Canada are very obvious decisions by the individuals that incur them.

[GGG]

Originally Posted by opendoor

There are no savings from lower interest rates. The purchase price of housing has simply been driven higher to compensate for lower rates.

So it's true a person with an $80K mortgage in 1980 has a similar mortgage payment to person with a $600K mortgage now after accounting for inflation. But paying off your mortgage was vastly easier back then. My parents managed to pay off their house in 15 years just by devoting a fairly modest 5% of their more or less median income to extra payments. To pay off a similar house now in 15 years with a similar income would require putting aside over 20% of your pre-tax earnings.

Except you now have an asset that you can sell. You are better off having low interest high asset price than high interest low asset price over the long term.

[Slava]

Originally Posted by GGG

In Calgary the median family income can afford the median SFH. I find it tough to see an affordability issue when that is the case.


As an aside I don’t think we give Gen Xers a hard enough time. I’m the tail end or the start of the millennials but bought a house a year too late. Gen X got to profit off the property increase along with being in higher earning jobs during the 2004-2014 oil boom rather than just starting careers.

Is that the ages of the oldest millenials? This is part of the reason that arguing about which generation is at fault is sort of pointless though.

Anyway, I'm on the cusp between Gen X and Millenial (I think?) And all I know is were told how incredibly lucky we were to come into the workforce when we did. Apparently all the boomers would be retiring and so many jobs would be open that we were going to be amazingly blessed. Well...when I graduated from my undergrad there was double-digit unemployment and the boomers weren't retiring in droves. I think that's still the promise made though?

And judging housing prices by today's standards is incredibly difficult. It's true that they were much cheaper back in the day, but so were wages. To give an example that's not related, but might put things in perspective, people would buy life insurance for $5,000 or $10,000 face values. These days no one is considering that. The minimum is basically $100,000 and people are routinely at $500k and above. It's just inflation. It's easy to look back today and think "wow a house for $200k! I would have bought 3-4 of those and made a killing!". But back then you would have had an income of like $30k/yr which is roughly minimum wage today. You're not buying 3 houses with that kind of income unless someone is foolish enough to let you borrow 15-18 times your income!

[OMG!WTF!]

Originally Posted by GGG

Except you now have an asset that you can sell. You are better off having low interest high asset price than high interest low asset price over the long term.

Sort of. Unless the high asset price goes down. A 5% haircut is a much bigger deal on expensive houses than cheap ones.

[flamesfever]

nm

[blankall]

Originally Posted by GGG

In Calgary the median family income can afford the median SFH. I find it tough to see an affordability issue when that is the case.


As an aside I don’t think we give Gen Xers a hard enough time. I’m the tail end or the start of the millennials but bought a house a year too late. Gen X got to profit off the property increase along with being in higher earning jobs during the 2004-2014 oil boom rather than just starting careers.

Firstly, Calgary is one of the more affordable markets in Canada. Calgary has also always been a relatively affordable city. It's a fact though that housing in Canada is the least affordable it has been since the crisis in 1980 and inflation adjusted wages are lower than they were in 1980. Other goods like food, childcare, etc.. are all more expensive.

And yes, people can afford a $500k house now, if they pull it all together. What happens when mortgage rates go back to historical norms, or even 5%? That $2000/month becomes $3,500+ and a lot of people are in trouble.

As for Gen Xers, they just don't have the power in society that baby boomers do.

[peter12]

Originally Posted by blankall

Firstly, Calgary is one of the more affordable markets in Canada. Calgary has also always been a relatively affordable city. It's a fact though that housing in Canada is the least affordable it has been since the crisis in 1980 and inflation adjusted wages are lower than they were in 1980. Other goods like food, childcare, etc.. are all more expensive.

And yes, people can afford a $500k house now, if they pull it all together. What happens when mortgage rates go back to historical norms, or even 5%? That $2000/month becomes $3,500+ and a lot of people are in trouble.

As for Gen Xers, they just don't have the power in society that baby boomers do.

Good post, but I personally don't think we will ever see mortgage rates start to go back up. Everyone has too much invested in the housing market to see it cooled to any degree. Even marginal changes like the BC Spec/Foreign Buyer Tax cooled the market to such a degree that it halved the province's annual economic growth.

[OMG!WTF!]

I think there is way too much property tax risk coming up to justify owning anything. It's definitely in the mail.

[burn_this_city]

Central bankers know they can't raise rates without unwinding the inflated asset values. It would be a catastrophe for markets like Toronto and Vancouver. Many people have the majority of their net worth tied up in their homes.

[peter12]

Originally Posted by OMG!WTF!

I think there is way too much property tax risk coming up to justify owning anything. It's definitely in the mail.

Municipalities have to pay for services. How else would you prefer they do it? Especially in a place like Calgary which is essentially built around expensive, sprawling infrastructure.