Young people don’t need to fret about home affordability. Things will work out.

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With housing prices skyrocketing, the media are featuring stories every day about affordability for first-time buyers and analysis of renting versus owning. Young people, we are told, feel despair at the prospect of ever being able to own a house. I don’t know if that will be true or not. As a financial planner though, I would say it doesn’t matter. They can still have a strong financial plan whether or not they own a home.

This made me think of my own journey. I finished school in the early 90’s in the midst of a recession. Manufacturing was in steep decline in southern Ontario. Jobs in all industries were hard to find.  A lot of friends who went to teacher’s college were struggling to land a position. The real estate market was very quiet so agents and lawyers were hurting. Actually, it was a double whammy for the legal profession because no-fault insurance had put a dent (pun intended) in motor vehicle accident litigation.

Cartoon of a financial advisor speaking to his client about being able to afford a home

Interest rates were still quite high. Not the 12 -14% you hear about but around 6 – 8%. It had an impact on home affordability to be sure. I recall my 25-year-old self talking to a 60 something retiree who liked interest rates where they were and didn’t want them to fall so he could sit back and keep his savings in GICs. I snapped at him saying “Sure you do. When you were my age, you bought a house with a 25-year mortgage at 3%. Now you want to invest at high rates with no risk. It’s great for you but what about people like me?”

I made entry-level money back then and so did my spouse. We found a way to buy a house and we had a child. Her participation in the workforce was touch and go for a few years.  I started down a path to a corporate career in Toronto.  I got restructured out of a job and became an advisor with no clients and no assets under management at the beginning.  I got restructured out of that, landed somewhere else, not long after jumped ship, and went on my own.  And…. You get the point.  Thirty years later, all is well.  The path through life is not straight and smooth.  There are turns, bumps, barriers, and obstacles.  I think every generation looks at their future and thinks they’ll never have what the last one had.  And yet somehow, like many things in life, things have a way of working out.

It still takes effort and some discipline.  But there is room for fun and a few mistakes too.  My advice to young people, including my son, is don’t worry about whether you’ll own a home or not.  Focus on your income and building your net worth, however, it is comprised.  Thirty years from now, you’ll look back and say “Not sure how I got here, but I got here”.

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