Millennials buying real estate in Calgary: Is it worth it?

This will be a short article because there is not much to say.

I am like most millennials I know. I want a home so that I am not paying someone else's mortgage, and will eventually have some equity I can do things with in the future. My wife is a full-time student, and our first baby is in the oven. Therefore, it is my income that will be getting us into a home.

I have millennial friends from all walks of life: from doctors and lawyers to tradespeople and sales associates to entrepreneurs. The doctors and lawyers own homes that have depreciated. The tradespeople and sales associates struggle to make and save enough to get into the housing market. Only about 50% of the entrepreneurs are in a place to buy. This is my snapshot of the situation.

I'm about in the middle of what the average millennial makes in Calgary (source below). I make between 50-60 thousand a year, or about $22 an hour after taxes. I have some student loans, and I am actively incurring more (partly because I want to learn and partly because I want to live comfortably and without financial worry). I have some savings that will easily cover 5% down on a place between 275k and 375k. I have about $1200 left a month after all expenses. All of this together, I qualified for a mortgage of 260k.

Okay, here is the meat and potatoes of this narrative. I was shopping for a place for us to live for the next 5 years. My mortgage would get us a small starter home in a condo or a townhouse in a decent location (a 15 minute drive or 20 minute transit trip to downtown). Here is the kicker, the mortgage would cost us more month to month than renting. When I calculated the difference in amount saved over 5 years of owning (equity + savings) versus renting (just savings), there was a 10k difference in favour of renting. Owning I would have approximately 36k in equity and 10k savings. Renting I would have 56k savings... What the heck!? I would be dependent on the housing market increasing to make up that difference? That's hard to digest.

To finish our story, we were unable to buy. We were going to buy an older place and reno it to be something more comfortable. We wanted to access the First-time Home Buyer's Incentive to lower our monthly payments, but CMHC calculated a monthly payment from outstanding student loans (even though they are not in repayment) which decreased the mortgage to less than 220k. This made affording renos out of the budget and took us back to the drawing board. Calgary did not seem to be the easiest place to get in the housing market.

We are still planning on taking advantage of the housing market while we are in the cold winter months (real estate goes down during the winter months). But, we might find a cheap place to rent so we can save and wait for when baby comes. Hopefully, by then a better real estate option opens itself up to us. Next time we are going to be using a mortgage broker and trying out a different real estate agent, so it will be interesting to see what the difference is.

Though I have not figured out a perfect formula for millennials and the housing market, I did come out of this experience with some valuable learning points.

Drake's Take-Aways:

• Buy a place if you are not good at saving (you'll save without knowing it)
• Find cheap rent and save if you are good at saving
• Think of your first home like an investment (because it is!)

Drake's Wealth Tip:

• Invest in at least 3 different things (eg: savings, home equity, RRSPs, stocks, art & collectables, etc.)

Please join me in brainstorming and collaborating on ideas to make owning a home a reasonable and prudent decision. Message me any time :)

~ Drake E.