Friday, July 6, 2012

Fri Post #2: "It's just how it is!"

Interesting housing story over on CTV.  You can click here to see the clip.

The segment is titled 'Generation Squeezed' and it profiles a young family who question whether they will ever be able to own a home in Vancouver.

28 year old Derek Atkinson is interviewed.

Derek and his wife have a combined income that would allow them to buy a $500,000 home but a minimum 5% down would require a downpayment of $25,000.

The problem is, saving up $25,000 will take as much as six years... and that's a stumbling block.

But the Atkinsons are privileged. CTV tells us the average family only makes $67,000 per year, enough to qualify for just a $300,000 mortgage... and in Vancouver $300,000  doesn't go very far.

It prompts CTV to ask, "do young Vancouver couples have a right to home ownership in the City they grew up in?"

Which brings us to Tom Davidoff from the UBC Sauder School of Business.

Davidoff tells us;
"There's not going to be any free lunch in the Vancouver.  There's not going to be any free lunch to own a home in the most Beautiful Place on Earth... so I think people need to be prepared they are just going to have to accept that reality."
CTV then drops another great stat. Average household incomes are no higher today than they were in the 1970s. And with those stalled incomes they need to pay for those housing prices which have gone up 76% across the country and almost 150% right here in BC.

CTV concludes that it all adds up to a growing sense of frustration and hopelessness for an entire generation of Canadians like the Atkinson's.

The story closes as Atkinson says;
"it is just a big challenge... you know... right now you just get resigned to it... it's just... how it is."
It's just how it is... that's the message.

This... after a week long orgy of doom and gloom about real estate and the potential for a collapse in housing prices?


More on this later on the weekend.


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  1. Featured couple is familiar to me through my child. Sadly, I hear they recently purchased a the peak.

  2. If it takes 5 years to save $25,000, then you can not afford a $500,000 home and you risk substantial hardship with a $250,000 home. It is not unlikely to get a maintenance bill approaching 2% with no warning. That anyone would qualify them for 500k is criminal. It's like handing out loaded guns.

    This family is being pushed to the brink, and unless they have a buffer (unlikely), I strongly suggest they increase their savings capacity. This could require hard choices, but it's better to make a few in advance than to be forced into many at once in an unfavourable situation.

    How much is child care? It could be crippling. Can it be reduced through family help or mutual arrangements with friends? It depends a lot on schedules, but "everyone" has this problem so if you can't get direct help look for mutual solutions.

    If rent is more than 25% of after tax income, you need to find a cheaper place to live, full stop. For a mortgage at current rates, you could do 30%. That's something like 300k. They would need both jobs to be secure. Does this sound "normal" to an American now?

    If I were this family I would take an axe to the monthly budget. Cell phones, cable TV, etc. Cut 'em if you've got 'em. I'm not paying for cable TV, but I do pay internet + $8 for Netflix. But if I were in their shoes, I might cancel it.

    It can be very hard to have a tight budget with kids that age. But you can show them smart sacrifices that leave you better off in the long run. Save a extra money for them every quarter: spring = clothes, summer = activities, fall = school, winter = christmas. Buy winter clothes in spring when they're on sale.

  3. Looks like CTV is willing to get just about anyone to repeat the same old tired statements like "most beautiful place on earth" soon to be the "most broke place on earth" to scare the last few un-informed joe bag of donuts into the market. Disgusting to allow speculation on a value of an asset without a stating the obvious that it simply cannot be predicted.

  4. To be fair, while $25,000 would be the minimum downpayment for their max mortgage, Derek said it would take 5 years to "save up a decent downpayment." I took that to mean that he would want to put down more than the minimum. Maybe I'm being naive.

  5. These so called experts keep trotting out the same old worn out BPOE mantra. It's tiring and frankly, sickening to keep hearing this propaganda.

  6. I really look forward to Davidoff's comments on "accepting reality" in 6-12 months time. I'm sure CTV, the great journalists that they are, will hunt him down for the follow up!

  7. Sure glad I don't have a degree from the Sauder business school, cause apparently they really suck at understanding economics.

  8. Well, good thing they didn't buy. They'd be 1st to foreclose their home. Unfortunately, there will be LOADS of people doing that very soon! On the flip side, once prices crash, many will be able to afford a home. Unfortunately, many will have years of bankruptcy and bad credit to their names. I guess that's how the world works.

  9. They would need both jobs to be secure. Does this sound "normal" to an American now?
    Financial Advisers Twickenham