Weekend Reading: Home Ownership Sucks Edition
For many Canadians, owning a home is a sign of personal and financial success – a rite of passage signalling that you’ve made it on your own (maybe with some help from mom & dad). Just over two-thirds of Canadian households own their home, which puts us ahead of countries like the United States, Australia, and France, but well below the likes of Italy, Spain, and Norway.
Soaring real estate prices across the country have kept housing top of mind. Ask any journalist or blogger what the most-read stories are and they’ll invariably say anything to do with housing.
I must admit I don’t quite get the obsession. Maybe it’s because I can be an emotionless robot when it comes to financial decision making. Or because I live far away from the major Canadian cities where real estate has exploded in value. Here in Lethbridge, our housing market barely keeps pace with inflation.
Or maybe it’s because, as Canada’s worst handyman, I’m keenly aware of the constant maintenance and upkeep that comes with owning a home. We moved into our current home – a brand new build – 10 years ago. In that time we’ve had to deal with an insurance claim for major roof and siding damage, plus landscaping projects, plumbing issues, appliances breaking down, a basement renovation, and an ant colony from hell, just to name a few. Yeah, home ownership sucks.
That’s why this piece from friend-of-the-blog Kyle Prevost resonated with me. Kyle moved to Doha, Qatar last summer to teach at an international school. Now he’s decided to sell his home in rural Manitoba. This quote nicely sums up my feelings around home ownership:
“Endless fear of hearing a strange noise. Is that the furnace taking its last breath? Perhaps it’s the water treatment system deciding to spring a leak? Is that rain I hear – is it possible our septic system is backing up?!”
I acknowledge that I’m saying this from the privilege of being a long-time home owner (~20 years). I live in a low cost of living area and so it’s hard to put myself in the shoes of someone looking to buy a house today in a city where prices have increased by 30% or more year-over-year. The average home price in Lethbridge ($319,503) is less than half the average home price in Canada ($679,051). That’s insane.
We have serious housing affordability issues in many areas of the country where the answers seem to be:
- Rent forever
- Get a significant cash gift from relatives
- Move to a lower cost of living area
The last two just aren’t options for many aspiring home owners.
That’s why we need to destigmatize renting in this country. Renting doesn’t mean you’re a financial failure. In many cases it’s the smart financial decision. Renting is often cheaper, comes with fewer headaches, and gives you flexibility to relocate or travel for extended periods.
Meanwhile, home ownership isn’t all that it’s cracked up to be. Condo owners pay monthly fees and also may be hit with special assessments from time-to-time. Detached home owners have to deal with all the crap I’ve mentioned above, with maintenance costs easily surpassing 1% of property value each year over the long term.
This Week’s Recap:
I recorded an interview with Kyle Prevost on investing FOMO for this year’s Canadian Financial Summit. The annual online financial conference should go live later this fall. I’ll keep you posted.
I’ll also be chatting with Kornel Szrejber this week about pensions on the Build Wealth Canada podcast. Stay tuned for that conversation.
On Monday I looked at the Vanguard effect on mutual funds, fees and performance.
On Thursday I dove further into the mutual space and revealed the dirty little secret of the industry – closet indexing.
From the archives: Here’s Ben Felix on renting in retirement.
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Weekend Reading:
Our friends at Credit Card Genius have done the math to determine which Canadian rewards program is worth the most in categories like North American flights, long haul flights, free hotel stays, and groceries and gas.
Global News’ Erica Alini explains why some used cars are now selling for as much as new models.
The Humble Dollar’s Jonathan Clements debunks six playground taunts seen often on financial forums and blogs.
Downtown Josh Brown says your mission is to invest for the long-term. The world will offer you a million chances to fail that mission.
Morgan Housel explains why the highest forms of wealth are measured differently:
Keep two things in mind:
Desiring money beyond what you need to be happy is just an accounting hobby.
How much money people need to be happy is driven more by expectations than income.
Here’s Nick Magguilli on how investing has evolved from something only done by the rich and powerful to something done by everyday people.
PWL Capital’s Ben Felix explains the 5% rule when contemplating renting versus buying a home:
Jamie Golombek looks at a recent case involving a Vancouver taxpayer who purchased, demolished, constructed and then sold three homes in a six-year period.
Louise Cooper explains why women in particular have their work cut out when it comes to funding their retirement, but are generally better at investing than men are.
Preet Banerjee went off the record with Peter Mansbridge for his 100th (and possibly final) episode of the Mostly Money podcast. It was a good one!
A Wealth of Common Sense blogger Ben Carlson explains why hedging inflation is harder than it sounds:
“Markets always require context but the biggest lesson here is how hard it can be to hedge against short-term risks in the markets.”
Squawkfox blogger Kerry Taylor, who lives near Vernon, BC, describes her evacuation plan as wildfires rage nearby.
Finally, why waiting for baby boomers to die is not effective housing policy.
Enjoy the rest of the weekend, everyone!
Thanks for sharing your experience on home ownership Robb. Kyle Prevost’s post was an enjoyable read too. As a lifelong renter, the cult of home ownership has always puzzled (and sometimes irritated) me.
FYI, there’s a broken link to Morgan Housel’s latest post. The url is:
https://www.collaborativefund.com/blog/the-highest-forms-of-wealth/
It’s amazing just how much home prices rose more so than wages. I do feel for the younger generation and what they have to go through as I think that the rich will continue to grow richer and that the poor will continue to grow poorer.
I don’t think there’s anything wrong with renting forever but still.
Great insights, Robb. My only comment is that I’d reign in that 1% estimation for maintenance costs. Most detached homes in B.C. are $1,000k+ and there’s no way they’re spending $10k a year in maintenance – I know I’m not. I’d estimate a 0.5% being a more accurate number over the long-term for these $1,000k+ houses.
I own property in Florida. The biggest hassle we had when we spent the winters there were taking care of an empty home. Solution, sell the home, get a nice apartment and take a small percentage monthly to use toward rent from the lump sum while continuing to invest the proceeds. Load up your TFSA first and the withdrawals are tax free. When we go south we lock our door, park our car underground and leave with few concerns. Suggest you add up your carrying costs for your home over the last years to get an average, you may be quite surprised as to how much you actually spend annually.
I’m a lifelong renter, and – given the cost of buying a home nowadays – probably always will be.
I was mostly fine with that, until a shortage of affordable rental options made it clear that I might be locked in to my current apartment indefinitely. My landlord died, and his son has scant interest in maintaining our building. And then along came COVID, with the discovery that many of my fellow tenants have no interest in wearing masks and/or distancing in common areas such as hallways, stairways, the elevator, lobby, mail room, laundry room…
There are certainly plenty of challenges with home-owning, but a detached dwelling looks golden to me in a way it never has before. And I’ll admit that I’m now envious of my friends who bought houses way back when, and who don’t live in a building where they have no choice but to inhale shared air every time they want to leave their home.