Winter is coming this spring for first-time home buyers
Affordability is under assault on two fronts as the busy spring buying season approaches – prices are soaring and interest rates are set to start rising from their pandemic lows. ‘Winter is coming’ is a phrase from the Game of Thrones fantasy series that foretells of dark times ahead. How appropriate for home buyers.
The average Toronto house price jumped 28.6 per cent in January over the same month last year to $1.2-million, while the benchmark Vancouver price rose 18.5 per cent to $1.3-million. Later in February, we’ll hear about what’s happening in the many other cities across the country where prices have been on the boil.
Rising rates should weigh on this price growth, but this will take time. In the near term, we could easily have parallel rising trends in the cost of buying homes and in the cost of financing these purchases.
What’s it like to try and buy a house in this environment? We want to tell the story in the next season of our Stress Test personal finance podcast for Gen Z and millennials. To do it, we need the help of first-time buyers. We’d like to hear your impressions as you navigate new listings, open houses, bidding wars, bully bids and zero-condition offers. If you’re willing to talk to us, please contact my Stress Test co-host, Globe personal finance editor Roma Luciw, at rluciw@globeandmail.com.
We also want to delve into the very real fear of missing out for aspiring young home owners. The term FOMO is sometimes used in a patronizing way that suggests people are following the herd. But with both prices and rates heading higher, it’s realistic to be afraid you’ll never get a house if you don’t buy now.
Through four seasons, home ownership has been a much-discussed topic on Stress Test. We’ve looked at parents helping their adult kids with down payment money, at buyers leaving expensive cities to find cheaper houses elsewhere and at the key things buyers need to know. Next up is what could very well be an epic spring home buying season.
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Rob’s personal finance reading list
Investing myths for the fearful and over-confident
A veteran portfolio manager discusses eight of the biggest investing myths. Give this a read if you’re worried about stocks, and if you think there’s no reason to worry.
Optimism about housing keeps pace with rising prices
Even with interest rates set to rise, people are increasingly optimistic about the price of their home rising. Low rates have helped clear the way for a spectacular two years in Canadian housing. But this pace of rising prices can’t continue without strangling affordability.
Next up in online shopping: Cremations
The New York Times includes an Ontario company called Eirene in a survey of companies that offer people a way of booking a cremation for a loved one online. The pitch: Convenience and price. The target market: Gen Xers, because they arrange most funerals these days.
Is it time retire F.I.R.E.?
An investing blogger asks some tough questions about a movement in personal finance that goes by the acronym F.I.R.E., for financial independence, retire early. His view is that there’s too much attention on the early retirement side.
Q&A
Q: What exchange-traded funds can I hold in my tax-free savings account that will not be subject to U.S. withholding taxes? I want to invest in the U.S. and Canadian markets.
A: Check out the Globe and Mail ETF Tax Guide for help matching your ETFs to the right type of account to save on tax.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
A list of 10 federal government benefits for people of all ages, including several related to the pandemic. Worth a look to see if qualify for any of them.
The Money-Free Zone
A song for these times: Many Rivers to Cross, by Jimmy Cliff.
Listen to this
Mastering Money is a podcast about personal finance from Chartered Professional Accountants Canada. Topics include how to talk about money with loved ones, women and money and teaching kids about money. There’s also a small business series.
In case you missed these Globe and Mail personal finance-related stories
- Returning online orders is already a nuisance. Buy now, pay later plans can make it worse
- RRSPs, TFSAs, downsizing cash, inheritance: Which assets should retirees draw down first?
- Canadian yacht and private jet makers brace for cancelled orders under Liberal luxury tax
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
