Good news, kids. No summer election. Jim Flaherty has a plan to pay down the $50 billion deficit (hold on to your wallets). And Re/Max says people are snorfling up million-dollar homes in T.O. like itâ€™s 2007.
Almost enough to make you forget about our lost manufacturing sector, jobless engineers, bankrupt car companies, the Air Canada bailout, collective denial and, oh yeah, the pandemic. And did I mention record household debt, disintegrating boomers and peak oil? Whatever. Pass the buffalo chips.
Of course, this blog is all about me (as in, â€˜youâ€™), and our endless orgiastic relationship with real estate. So, letâ€™s whisk off to the city where the pelicans go to die:
Hi Garth.Â I’m sure you get tons of questions each week and here is my attempt at sticking my head in the lion’s mouth…
My husband and I are in our early 30s and for various reasons are not at the level of “financial security” as most others our age.Â After waiting six years for a permanent teaching contract in Saskatoon, this is the first year we’ve had the security of full-time employment for him.Â I work in the Administrative field and combined, we earn $98K/yr.Â We have no kids.
We chose not to get into the real estate market a few years ago b/c we wanted to focus on paying off our Student Loans which we managed to do last April (four years early by the way).Â We have no consumer debt (paid that off, too) or loans; have about $30K in RRSPs and $25K in the bank ($10K in a TFSA and $15K in cash).
As a result of choosing to pay off debt rather than obtain a mortgage, we have missed out on decent priced housing.Â Saskatoon’s real estate doubled in 2007 and kept on climbing in 2008.Â Currently, the average home is going for $280K and quite frankly, it doesn’t buy you very much.Â We rent a 2BD for $875 and our other bills related to housing costsÂ are less than $200.Â A mortgage could easily be running us $1200+ not counting all the other costs of owning a home.
We are saving $25K per year for a downpayment, but when we will actually purchase, I don’t know.Â It doesn’t “feel” right.Â Not owning our own home has made us feel like “second class” citizens, but we refuse to not enjoy life just so we can say we live in a house.
I have a couple questions – what is your feeling about the Saskatoon housing market specifically?Â Do you think we should keep renting until we can darn near pay cash for the house (8-12 yrs)?Â What are some other options you see us taking advantage of so we are smart with our financial future?
Thanks for considering a reply. Sue.
Second class citizens? Are you serious? Youâ€™re watching w-a-y too much HGTV and reading too damn many Open House classifieds in the Star-Phoenix. Real estate can be a trap and a financialÂ sinkhole, just as easily as it can augment your wealth â€“ like any other investment asset. If you buy high and sell low, itâ€™s a disaster. If you buy higher and sell higher, you win â€“ but only if you find a greater fool. Like a nice couple of thirtysomethings willing to dump all their savings, assume a massive debt and increase their monthly living costs â€“ so they can join the herd and feel fulfilled.
Please. Gimme a break. There are lots of valid reasons for buying a house, but citizenship ainâ€™t one of them. You buy to stabilize your housing costs, to build up equity over time and realize a capital gain, as a forced savings vehicle, as a convenient place to have a basement grow op orÂ maybe to raise a family. Buying for social status, or because all your friends are doing it, sucks.
Now, to Saskatoon. Yes, the market there played dramatic catch-up over the last couple of years, going from underpriced to overpriced. There was much talk of an oil boom, a potash boom, a biofuels boom and even a population boom (it wouldnâ€™t take much), which pushed prices higher â€“ unsustainably. The inescapable reality is a province with barely a million people cannot sustain a continuously rising market in the absence of surging commodity prices and rising family incomes.
Letâ€™s also consider the weather. The current drought and withered crops could well presage the almost-immediate future, in which a changing climate brings desertification. This is a substantial threat hanging over much of western Canada, just as it is helping to forever destroy real estate in places like Phoenix. Something a couple in their 30s would want to dwell on, Iâ€™d say.
Anyway, should you buy? Sure, if you want no cash reserve and less disposable income. If you want to impress your friends and prove youâ€™re not defective. If you can handle mortgage payments which will likely double when you renew in five years. If you think real estate values in the city will escalate, even though childless couples making twice the average income haveÂ trouble buying. If you feel dumb saving $25,000 a year when your home-owning friends are eating KD. If you feel good about buying an asset at its highest point.
Then go ahead, by all means. Just stop writing me.