Is Your House Helping Or Holding You Back?

On my December cruise, I overheard a whole lot of people talking about the purchase of their home. This isn’t scientific and I have no clue where they live. There’s also no such thing as an average price. There’s a difference between New York city or White Rock and rural Saskatchewan or Wisconsin.

One couple was talking about a $104,000 purchase. Another paid $127,000 two years ago, another just refinanced their $185,000 home. We’ll never see those prices in the Okanagan, lower mainland, or here in Edmonton, or Calgary. Our prices start with a 4 or a 5…and that’s if we’re lucky.

Incomes aren’t really different in the US and Canada. But what would our life be like if we didn’t have mortgage payments double or triple those of someone who didn’t come close to paying half our purchase price? It’s not as though we all choose to live in a mansion. If that were so, we would deserve the huge payments that come with a chosen lifestyle. We’re paying the huge taxes, utilities, upkeep and mortgage payments because our prices are so much higher. We’re now one of the highest countries in our income to debts at 1.6 times. The US is down to 1.1 times. So we’re way broker than Americans, and a large part of that is our cost of housing.

I’m not wishing for a housing crash, and that wouldn’t solve anything anyway. But, if I had a $150,000 home, I would now be mortgage free and have over $200,000 saved. That would have been the monthly payment after the house was paid off diverted into investments. Instead, you, me, and tons of Western Canadians can’t really save much, because it’s all going into our homes.

I don’t have an answer, because I’m not moving to rural Saskatchewan or Wisconsin. Even selling my home and renting won’t put me ahead financially. It’s just depressing sometimes to think of how much of our finite incomes go into our homes. It’s also nice to dream sometimes of what it’d be like to be mortgage free before age 30. That isn’t hard when the house cost $140,000 or so and the interest is tax deductible…

If you actually have money and are investing, you might want to check with your financial or investment advisor on something in the area of housing. Real Estate Investment Trust (REITs) are not normally something to invest in when rates are about to rise. But there is, and will continue to be, a stall in home sales. Right now, the 20 to 30 something generation is still buried in $1.3 trillion student loan debt. They aren’t buying homes, because they can’t qualify for a mortgage, so first time homebuyers are a rare breed in the market. As a result, they’ll continue to rent, and that’s what REITs are all about. Don’t do it because I said so, but the logic makes sense.

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