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Are we pushing millennials into a financial abyss of home ownership?
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2017 May 25, 5:02am 2,862 views 4 comments
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FNWGMOBDVZXDNW
2017 May 25, 11:52am
The article was oddly about avocado toast as much as home ownership.
The general feeling I get while reading that is that Millenials were raised with excessive spending on eating out, and they feel it is normal as part of their 'standard of living'.
One aspect of this is that having an avocado toast isn't a big deal. Spending too much on restaurants in general is. If someone has avocado toast every two weeks and another has starbucks coffee each morning, the avocado toast person does better.
Also, restaurants are much more a part of the landscape now then 25 yrs ago, so the focus on restaurants is a little odd. Of course people eat out more now than 25 yrs ago.
The important thing is this: People need to take an objective look at their finances, what comes in, and what is important to them, and spend accordingly. People who fail in my experience tend not to do this. They make decisions based on what other people are doing, they want to treat themselves, etc. It's just amazing to watch and listen to these people. As part of this, people need to decide to save something, regardless of their situation. Too many don't do that.
FNWGMOBDVZXDNW
2017 May 25, 11:56am
As for stocks or home-ownership, the answer is so fucking simple it hurts.
If you are going to be in the same place for a long time, buy a fucking house. It is favored tax-wise, and is always the best solution if you are going to be somewhere long enough.
The obvious corollary to this is that if you are going to be moving soon or really need the flexibility, just rent.
The not so obvious corollary is that you had better be making more money by keeping your flexibility. If not, you are shooting yourself in the foot financially.
FNWGMOBDVZXDNW
2017 May 25, 12:23pm
The current homeownership rate is about what it was in 1995 (page 5 in the cencus pdf).
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
What I'm wondering is if this means that the homeownership rate will drift upward (rebound) some. If so, it seems to me that that would drive higher prices, unless investors suddenly have another better vehicle for investment.
Unless your adult children are well positioned, helping them into the housing market could be toxic to their finances. You may be better off encouraging them to rent and giving them money to put into the investment portfolio they’ll use to generate an amount of wealth similar to homeowners’.
Family help has been a constant in home buying for generations. But now, it’s subsidizing close to half of house purchases by young first-time buyers. There couldn’t be a clearer illustration of how surging house prices are reducing affordability for young adults.
As a society, our response to this phenomenon is that everyone has to try harder to get young people into houses. Parents have to help their millennial children and those kids have to stop wasting money on anything but house down payments. This is the conclusion to be drawn from the meme of avocado toast, which is basically mashed avocados on toasted bread. Apparently, millennials like avocado toast and pay good money for it when dining out. A narrative, which began on social media, is emerging that spending on luxuries such as this is preventing millennials from being able to afford homes.
I highlighted one instance of this in the Carrick on Money e-mail newsletter last fall (subscribe here). Last week, avocado toast was cited again. A millionaire Australian real estate mogul named Tim Gurner said that when he was trying to buy his first home, he wasn’t spending money on fancy restaurant food and coffee. Media everywhere picked up on the story.
Some will see avocado toast as a metaphor for millennial self-indulgence. But the fascination with this storyline says a lot more about society’s trivial understanding of millennials than it does about these young adults themselves.
Avocado toast is not the problem in today’s housing market. The average Toronto-area house price jumped $181,709 over the 12 months to April 30. That’s 12,114 orders of avocado toast at $15 a crack, or 33.2 orders a day over a year. This brings us back to parental financial help for millennial home buyers. The need is obviously there, but so is the danger of getting millennials into a situation they can’t handle in a financial sense.
As the Manulife survey notes, the increase in parental support for millennials compared with previous generations comes despite a long-term trend toward two-income families. Over the past 40 years, the number of families with two employed parents has doubled. Families often need two incomes to afford a house today.
There’s also a high incidence of precarious work in the millennial generation, which means a lot of people are working contract or temporary jobs. This leads to inconsistent or variable incomes, a problem documented in a recently issued survey that was sponsored by Toronto-Dominion Bank.
Almost 40 per cent of participants said they have experienced moderate to high levels of income volatility in the past year, and two in 10 put themselves in the high or very high category. TD’s summary of the results said people who experienced high or very high levels of income variability are more likely to see themselves as falling behind financially and more likely to report feeling stress about money.
More: https://www.theglobeandmail.com/globe-investor/personal-finance/genymoney/are-we-pushing-millennials-into-a-financial-abyss-of-home-ownership/article35089740/
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