Although we find the current state of economic policy endlessly fascinating, and even outright humorous, there are serious trends being created that aren't pretty.
More and more of us are coming to realize that low interest rates are great for the rapid build-up of equity in our Canadian properties.
It's flat out fun money and it's the reward for taking on debt in a world that values debtors over savers.
Don't believe that last statement?
It's surely not what our parents taught us, is it?
Talk to any retired person who diligently saved and is now on fixed income.
Ask them how they feel about working hard and saving up.
We're sure they were banking on interest rates of 6% or 8% or even 10% just like they were promised by all those financial planning commercials.
So for us folks who have taken on debt over the last ten and fifteen years, we have been richly reward with funny money.
And now because housing prices continue to increase much faster than income levels, we're left with a trend that's likely to change our children's future.
Many will not be home buyers.
They'll be renters for life.
At least those wanting to live in a big city.
Check out this from the Financial Post, There's a Rental Renaissance Sweeping Through Toronto & Vancouver Thanks to Sky-High Home Prices:
The average price of a detached home topped $1.1 million in Toronto and $1.4 million in Vancouver last month.
That’s left many potential buyers stuck in the rental market, keeping vacancy rates low and pushing rent prices higher. In Toronto, condo rents have climbed 15 per cent over the past five years, said Hildebrand.
“That’s what investors and developers were waiting for — the big jump in rents,” said Hildebrand.
It's really not their fault that they won't be able to buy a home.
The economic rules aren't understood by many.
Debt is still thought of as "bad."
Saving as "good."
There's no doubt that bad debt really is bad but holy smokes, good debt is really, really freakin' good.
Actually good debt is one of the only ways to ride the wave of today's money rules.
It's not just Canada that's facing this, let's take a peak at some of the U.S. data points becoming available...
Look at the growth of wages when compared to the growth of the economy. The Federal Reserve Bank of St. Louis just published this data yesterday:
And maybe this lack of income growth is the reason that people who are buying homes from "flippers" in the U.S. are increasingly landlords instead of occupants...
Part of the reason the next generation of buyers may not be able to buy is definitely due to the whacky financial world we live in.
The other part of the story may be that our children are racking up a lot of debt going to Universities and Colleges that don't teach them any skills.
I personally have a Bachelor of Science from the University of Toronto that is:
1. More like a Bachelor of Arts, (my majors were Psychology and Sociology).
2. Practically useless in getting a job.
Although I did learn how to think for myself and debate topics back and forth I'm not 100% positive the years spent in University couldn't have been spent more productively elsewhere... Where I would have learned the same things, perhaps faster even.
I had to go to another school post-grad, that cost me a small fortune, to pick up I.T. skills that companies were actually hiring for.
Check out the amount of debt that our next generation of home buyers is now leaving school with (again this is U.S. data)...
How are we going to depend on this generation to spur home buying activity?
High home prices.
Low interest rates forever.
It's a pretty entertaining looking future.
But in our extremely humble opinion there is one way for the next generation to be able to afford their own home in a big city...
Focus on improving their skills instead of getting a "good job."
Pour through the want ads or Workopolis or whatever and see what is in demand.
Ask an Uncle or Aunt who owns a business what type of people they need.
There is a TON of opportunity in this world to create whatever life you want.
For our children.
We just gotta be smart about it.
Until next time ... Your Life. Your Terms.