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What's a millennial to do in this housing market?

16K views 73 replies 30 participants last post by  vivienne 
#1 · (Edited)
Living in Toronto... interest rates at an all-time low for a long time, semi-detatched and detached houses hard to come by, real estate inflated and overpriced, "bubble" is becoming more and more realistic... Vancouver is shambles. Market is crazy hot! But eager to leave home and start fully embracing the challenges and growth associated with being fully independent and responsible... no debt, in a long-term relationship... mid 20's with marriage in the near future, making good income (100k+ combined) but still in our mom's basements, living apart still after 5 years of dating (very frugally and no issues continuing to be frugal), unsure about waiting out the real estate storm...

When do you draw the line between "stay at home and save" and "leave the nest, learn to fly and start your life" when the real estate market is on FIRE? Buying a home is still the ultimate goal, but not if it means a $600k mortgage in this inflated market... Thoughts on renting if your income allows you to save a good amount for a future home while renting? Sure savings grow faster when you're living at home than they would if you're dropping $1700/month for an apartment, but there's something to be said about independence and truly being a self-sustaining adult in your mid-20's...

Second-guessing everything before taking the next big step in life! Advice and tips for the millennials who are watching the real estate market go crazy in the GTA?
 
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#2 ·
Interesting post. Sometimes I find myself in this boat as well - granted i'm not even sure if I fall in the millennial generation while being 31.
For me, its a matter of a few things (which you have suggested). Good stable jobs with decent incomes, available capital (down payment), and the view of whether the real estate purchase is an "investment or a home".

If you have good incomes (which yours looks appears to be maybe just above average combined) with stable jobs, but more importantly a decent down payment (20%), then possibly it 'may' be okay for you. And if you view the Real Estate purchase more as a home than an investment purchase i believe you'll be more inclined to ride out the waves than looking and wondering at the value of your purchase is; not only that, your more incline to live there longer....the longer you live there, the more likely you will lose 'less' money, and the price becomes less of a concern. Having said that I live in Edmonton, where home prices are not as inflated as Toronto. If I were living in Toronto, I'd probably be more inclined to rent than purchase at this point of the RE cycle in Toronto. You are still very young, and time is on your side. And if you don't even have the 20% down, i probably wouldn't even consider purchasing at this point in time.
 
#4 ·
What CrazyEights said 1000%.

All I have to add is you should not feel pressured to leave your folks' place. You can learn to live independently without necessarily leaving the nest. Remaining frugal is key and saving your money should be your top priority. I come from european parents and leaving the nest in your mid to late 30s or only when you marry is a very common thing. I still learned to be independant and built a hefty savings portfolio by the time I left. I was way ahead of my peers - first one to; own a car, own a house, own RE investments, own a business.

Good luck and continue on the right track!
 
#5 ·
re: "When do you draw the line between "stay at home and save" and "leave the nest, learn to fly and start your life" when the real estate market is on FIRE?"

Ugh, unless you are making a few hundred thousand per year, and that job is stable, taking on a $600k mortgage is not smart. Just my take!

The best thing that can happen in Canada is an interest rate spike, at least 25 basis points. It won't happen but it would be a great wake-up call.
 
#6 · (Edited)
Thanks for the tips guys. CrazyEights you're definitely right about saving for a wedding. She has a huge family (And loves to plan ahead even though I haven't even proposed yet.. haha), we expect it to cast upwards of $20k. We're in no rush to buy a house because she hasn't broken into her field yet (teacher), so she doesn't know which part of the city she'll end up working in. So it would be a bad idea to buy a house in Ajax for example only to find out in 2 years she gets offered a full-time position in Mississauga...

Mortgage u/w, we don't necessarily feel pressure to move out. None of our friends really have. But they're also all either not making good money, in student loan debt, or both. We're making pretty good money for our age, both very frugal and both debt-free with emergency money saved up. We want to rent - this real estate market isn't attractive at all. We're just unsure about rent + save a good amount or stay home + save a GREAT amount. Ontop of that, there's the whole social/emotional side of it. Like I mentioned, we've been dating for 5 years but have never lived together... there's certain strains and things we haven't been able to fully experience yet because we live apart.

My Own Advisor said:
Ugh, unless you are making a few hundred thousand per year, and that job is stable, taking on a $600k mortgage is not smart. Just my take!
Agreed... we have no interest in taking on a massive mortgage so early in our lives/careers. It's scary that so many young people are eager to rush into houses when they're overvalued and can barely squeak in with 5% down. I wake up every morning with fingers crossed that interest rates went up a bit... a market correction is sooooo needed right now. We have NO interest in signing up for that... our dilemma is more renting vs stay at home.
 
#9 ·
Mortgage u/w, we don't necessarily feel pressure to move out. None of our friends really have. But they're also all either not making good money, in student loan debt, or both. We're making pretty good money for our age, both very frugal and both debt-free with emergency money saved up. We want to rent - this real estate market isn't attractive at all. We're just unsure about rent + save a good amount or stay home + save a GREAT amount. Ontop of that, there's the whole social/emotional side of it. Like I mentioned, we've been dating for 5 years but have never lived together... there's certain strains and things we haven't been able to fully experience yet because we live apart.
I hear you.
The best advice I can give is to buy an average property that has a rental income suite. This will offset your payments and provide a good income supplement down the line.
 
#7 ·
Why are you so anxious to own a house. I didnt buy my first home until I was 31.

Govt wont let this market go on forever, it will either correct on its own or be done forcibly like Vancouver.

Until you are actually married and your career looks stable, dont worry about. Save and invest, then you will be ready to pounce when it does turn.

Or else move out of Toronto.
 
#8 ·
Well, if I look back at my life at that time, housing prices were indeed much lower, but the interest rates were much, much higher, making payments almost the same. Job prospects were nearly non-existent, unemployment was high...of course, nothing like the problems being faced today.

Personally, I would have loved to move into a nice house, or at least a prime apartment located in a great area...but that wasn't in the cards. I started off with a good apartment in an okay area, and got roommates. I started my first company and worked hard to build it. Eventually, as things started to take off, I upgraded apartments, but still needed roommates. Then I bought a small house, also with roommates...all while working on building my company.

Eventually, things started getting traction, company made money, married one of my roommates, still had another roommate for a few years and did whatever it took to make it work.

Too many people seem to want their cake and eat it too, instead of finding a way to gather the materials and learning to cook for themselves.
 
#10 ·
A lot of people have feelings very strongly on home ownership.

Especially in Canada we have insanely high levels of home ownership and many see it as an absolute failure for an adult not to own a home at some point. That said there are some very great advantages of owning a home. While there are many good landlords, I'd argue that there are probably more bad ones. And the good landlords tend to keep people a very long time, so they can be hard to find.

Still in places like Toronto and Vancouver the home prices are ridiculous. If you are millennial unless you have parents giving you a boatload of money or you have an extremely high paying salary (doctor, dentist, successful business owner) buying a home probably shouldn't be a priority, because it's a lot of risk, and it takes up too much of a percentage of your salary to the point where you could be working to pay your mortgage for the rest of your life.

If you can save money by renting I would highly recommend that route.
 
#11 ·
Between renting a place and staying at home, I would lean towards renting a place. Just because living with your partner is sooo much better than living at your parents'. Yes, it will cost some money, but it will let you try out living together before you get married, which is always good. I would hate to marry someone I'd never lived with.
 
#18 ·
I agree with this - live together for some time before getting married. You haven't proposed yet but you guys have already talked about how much the wedding will cost. You're considering buying a house with someone you are not married to yet. It could turn out well but also could be a disaster :)

By renting a place you'll know what you guys need. What kind of a kitchen, what kind of space, condo vs. house, etc.

P.S. After living together with my first fiancee for a year or so it became pretty obvious that it was not going to work out.
 
#15 ·
I'm a millennial and I'm not buying. Even if I wanted to live in a house, I could just rent one.

"Owning" a home isn't really owning one, when you have a massive mortgage that goes along with it. It's just renting by a different name, though admittedly it gives you more freedom and power to do what you want with the home.
 
#16 ·
You can rent a decent place in Toronto for much less than $1,700. You don't have to live in a CONDO. There are plenty of apartments and low rises that rent for $1000 - $1200 for a one bedroom and are close to downtown. We had a place at Bathurst and St.Clair for $950. Start small and see how it goes. I waited until 24 to move out of my parents house and it was far too long. Do it now and start living life as an adult. Its been 6 years and I still rent and save lots of money. I moved from Toronto to Vancouver, and now to interior BC to follow the lifestyle that I want. If I bought a house or condo in Toronto, these moves would have been a major headache.
 
#19 ·
A comment on the wedding....a but unconventional but my wife and I dumped every cent we had into a down payment for our first house, then saved for our wedding, which occurred 3 years later. We had never lived together before, and she had only ever lived with her parents.

Small wedding, less than 5K, and because we knew exactly what we needed, we asked for cash in lieu of gifts. We ended up generating enough cash to pay for our honey moon.

13 years after buying our house, our mortgage is paid off and we still have great memories of our wedding and honeymoon.

Unconventional, but we had the blessing of our family and I wouldn't change anything.
 
#20 ·
One could also point out that most of our ancestors, when faced with places too expensive to live in, moved across an ocean to barren land and started a new life.

Canada is a big place, lots of opportunities all across it...no one has to remain in Toronto. Contrary to some people's beliefs the rest of Canada has electricity, internet, computers, cars, jobs, places to eat, places to shop, places to work (even places that pay more)...
 
#28 ·
Canada is a big place, lots of opportunities all across it...no one has to remain in Toronto. Contrary to some people's beliefs the rest of Canada has electricity, internet, computers, cars, jobs, places to eat, places to shop, places to work (even places that pay more)...
I second this thought.

In the nearest little town to me, Bancroft, one can get for $200,000 what would cost north of $1M in Toronto. A teacher might earn 5% less than TDSB teacher, that is pretty much the same. Said teacher in Bancroft could walk to at least 4 schools from anywhere in Bancroft, that is get by without 2 cars quite easily.

In summary, a single teacher salary around here long term results in a likely better financial future than a dual teacher family in Toronto buying a >$1M house and owning 2 cars. The reality is that the teacher/teacher or teacher/police offices families up here with $200,000 annual income can live like absolute royalty. (I don't know how some of them still manage to live paycheck to paycheck, but they do.)

For consideration ...

hboy54
 
#22 · (Edited)
Curious as to what job only exists in one city in the entire world...or who would teach someone how to do a job that only exists in one city, can't imagine any school would offer a course, can't be that big of a market.

I suppose, if you're the primier, the other provinces wouldn't elect you after seeing what you did, but then again there is Notley in Alberta, so you can never say never I suppose.
 
#25 ·
Think along the lines of a specialization that large companies need (some, at least) and would tend to have centralized at the head office. Not the CEO :). Not especially well-paid or requiring advanced qualifications, though it can help. I could probably get a job in Montreal, but my french is middling at best. It would be a stretch, but I could work for government, such as DND. On the other hand, in the US, there are quite a number of cities I could work. I could probably live elsewhere in Canada if I consulted and did a lot of travelling, but I would probably spend more time in Toronto on business than living 'at home'.

If I gave up on this particular specialization, I could work in a lot of other different management positions.

I'm not trying to be overly coy, I just don't want to get too specific.
 
#29 ·
Hmm, we have lots of large head offices in Calgary so I'd be surprised if you couldn't find whatever specialized job here. Not that I would necessarily recommend moving here right now. I'm just not sold that Toronto has that many specific opportunities not offered elsewhere.

Anyway, for myself I bought a house with my fiancee, rented out the basement to save for our wedding, but that was a different housing market. I wouldn't recommend that now. I agree with the majority to really think hard about how important an expensive wedding is. They get you for every little thing, and while a $30K wedding is fancier than a $10K wedding it won't actually affect anyone's enjoyment of the day or the success of the marriage. It's also really easy to overestimate what percentage of the people you want to invite to your wedding today you'll even be talking to in 5-10 years.
 
#26 ·
I agree with Just A Guy. I work in the downtown core, but I sure as hell won't move to Toronto. The prices are outrageous and I afford a much better life even with the commute into work. I still come out well ahead of some co workers living within walking distance paying outrageous prices for a shoe box stacked on shoe boxes.

My advice..... Don't live in the GTA.
 
#30 ·
The earliest millennials would technically be 35 this year. Alot of them in the last 4 years beat their next generation to it. I know because I've been studying, observing for a long time.

When Danforth East Semis were going for 550K 4 years ago, all I saw at open houses were hipsterish millennials. But they all just had a baby or were pregnant. My wife and I used to joke that they were probably condo renters from Liberty Village. What last bastion of affordability in Toronto West of Victoria Park was wiped out starting the spring of 2014 with the infamous Rhodes 3-brm semi going over 700K shattering a psychological barrier.

I know one Millennial couple that bought a Scarbs bungalow just 1.5 years ago for about 600K. They definitely got help from their parents and or over leveraged. Now it's worth over 800K. Too many Millennials I found just wanted it too close to the city , along the subway, or new up in the real burbs where it's also exploded. They didn't even remotely consider the more affordable areas of the city. And even now, that's unaffordable (2 bedroom row townhouse at Kennedy Stn going for at least 450K with ~300$ in monthly maintenance cost). So the newer generation, there's still pockets in Ajax, semis, townhouses which are relatively cheaper.

But really, the time to marry, live with Parents is becoming more real and real. Just like what has happened in other parts of the world.
 
#31 ·
I'm curious why everyone stays in Toronto? I can understand folks with specialized jobs or family obligations but this can't be the majority...

You could move a couple hours away to Ottawa where salaries are comparable except you can buy a house and a rental property for less than one house in the GTA, significantly less downside risk in RE, less traffic, better hockey team :) etc.
 
#33 · (Edited)
^Agreed, I'm sure Toronto has the largest number of opportunities for most fields. But my personal experience has been no issues finding (tech) jobs in Ottawa and a very reasonable cost of living and great quality of life.

Here are some job searches in Ottawa...the vast majority being private sector jobs.
monster.ca - 'IT' - 1000+ jobs, 'software' - 948 jobs, 'hardware' - 49 jobs, 'mobile' - 251 jobs
glassdoor.com - 'IT' - 2165 jobs, 'software' - 1430 jobs, 'hardware' - 331 jobs, 'mobile' - 469 jobs

For reference - glassdoor results for Toronto:
'IT' - 12945 jobs, 'software' - 7064, 'hardware' - 1388 jobs, 'mobile' - 2951 jobs

So Toronto has about 4-6x as many tech jobs as Ottawa, but about 5x the population (i.e. more people applying for these jobs).

I suspect that as the GTA becomes more and more unafordable either talent (particularly millennials) will leave or salaries will have to adjust.
 
#34 ·
I just joined this forum thinking the exact same thing as the OP. We are at about 150k+ combined salary, have saved enough for more than 20% down payment, and if need be, can get a bit of help from the bank of mom and dad.

I'm 29 living with my gf in a condo, haven't proposed yet, but plan to within the next few months.
I've been sitting on the fence, just watching real estate prices inflate year over year and people kept telling me about this bubble that's inevitably going to burst and just wait.
Just in the past 3 years alone, prices haven't changed dramatically. It would have made so much sense, in hindsight, to leverage myself up even when I was making less money and had less savings, to get anything and ride it out to make massive capital appreciation that my salary wouldn't even come close to providing me in the same time frame.

Now my to-be in-laws are telling me, don't wait any longer cause I've already lost out so much and that Toronto isn't the type of city that will ever depreciate.
My personal thinking is that there might be a slowdown or minor market correction, but the prices won't ever drop/crash since the government needs to facilitate that change slowly whether it's with interest rate hikes/mortgage tightening rules/foreign buyers tax etc.

From reading these posts, it sounds fairly unanimous that we should just sit here and wait until that correction/crash comes. Unlike OP, we've already been living together for nearly 3 years in her condo. If we bought a new place, that condo would then become a rental unit to ideally offset her mortgage. I understand that the fundamental economics to support these prices aren't there, but I think that holds more true if you view Canada as a closed economy. There are so many foreign buyers that have tons of money to drop on places that they view are still relatively cheap compared to what they could buy in their home country. Say the BoC does raise interest rates, buyers slow down, home owners with mortgages get pushed beyond their means, foreclosures start happening and the bubble burst we've all been waiting for happens. The people that get hurt the most by this are those millennials that bought into this crazy market with mortgages up to their necks. The foreign buyers now see Canada as EVEN cheaper and continue to flood the market which will somewhat sustain housing prices. After what Vancouver did, now everyone from China is flowing over to Toronto. Keep in mind how many wealthy buyers there are from China where interest rates/mortgages don't affect their buying power at all. Sure there are stats saying it's not actually foreign buyers, as they only represent x% of sales volume, but what that doesn't show is the number of properties bought using a proxy like a local but still using foreign money.

I really regret not entering the market several years ago as the sound advice given to me then is exactly the same as what's being suggested now...to rent and wait out the crash. Just how much longer should we wait...what if waiting ends up pricing me out of the market...from being able to afford a detached home in a reasonable location a few years ago, and now being downgraded to townhome in a similar location now. What's next, wait 3 years and find myself paying the same to get into a condo?
 
#36 ·
Alot of people have regrets, even existing home owners like myself. Though the wife bought it when we were dating many years ago, I was eyeing properties in undervalued areas (Scarborough) for along time. I had no debt, making 70+ K for the 5+years. But didn't pull the trigger due to being risk adverse, having kids, etc. You also have to consider that you making more money now with your spouse is also because of the inflationary environment. I have friends in higher finance pulling in about 200K but even can't look to buy. That's because the very thing that has increased the income and job situation in Toronto is also part of the global force that has led to the skyrocketing home prices here.

Also, your gf wife-to be has a condo. There are now bidding wars for condos, so also consider yourself more fortunate than others. It also has undoubtedly increased in value. If you do plan to rent it out, rents have also increased. Either way, this extreme credit fueled inflation to get us out of the crash of 08-09 has actually resulted in huge market distortions and a loss of purchasing power when it comes to housing here. The risk takers were rewarded (as designed in a low interest rate, easy credit situation). I personally would suggest you look for something that you think you would be comfortable raising kids in. There are still cheaper places mainly in the east GTA. Even Scarborough. But you'd definitely have to also consider housing types that isn't right away 'turn key' or typically desirable home.
 
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