Great Expectations


6 minute read

August 23, 2013

I’d like to pick up on yesterday’s discussion about young people and their perception of the “value of a dollar.”

It’s very hard to evaluate the price of real estate, whether renting or buying, if you come from a place where a dollar is worth more/less to you than the rest of the world…


One of the first comments I read on yesterday’s blog post titled “How Long Should You Live At Home” was the following, from AndrewB:

“A lot of young people who live at home are used to a high amount of disposable income for “stuff” and place more value on getting that new pair of $200.00 jeans than living on their own. So long as they pay a bit of rent at home and get to blow the rest, that’s likely what matters to most.”

I’ve written a lot in the past about today’s “consumption society,” whether it’s been about debt-to-income ratios, the lavish lifestyle people live, or just the complete lack of knowledge when it comes to financial responsibility.

But today, I wanted to pick up on this idea as it pertains to expectations of many of today’s young buyers, specifically when it comes to buying or renting their first place.

I want to look at both sides of the coin, in what I call those who don’t “understand” the value of a dollar, and those who can’t “comprehend” the value of a dollar.

And by that, I mean that people who come from money often don’t really understand the value of a dollar, because the value they put on money has never been tested.  And those who don’t come from money and can’t comprehend how other people actually spend their money.

Let’s work with a few real-life examples…

Two years ago, I was working with a young couple – about 23 and 24 respectively, who were renting a west-end condo, but wanted to purchase their first place together – around $500,000.

I showed them condo after condo, mostly hard lofts as per their wishes, but no matter what we saw, it just wasn’t “the one.”

They weren’t very descriptive in their feedback, but rather kept saying, “I don’t think this is it.”

It made it very hard for me to judge what it was these units were lacking, as some were well-priced, some were exceptionally rare offerings, and some were units that I were in love with myself!

I met with them one night at the condo they were renting, and suddenly, everything became perfectly clear.

The master bedroom had fifty-two shoeboxes stacked up against the wall (I know, because I counted!), in a 5 x 10 grid, all high-end, and all incredibly expensive.  I’m not a woman, and I’m no shoe expert, but I’ve watched enough Sex & The City to know what Manolo Blahnik’s are.  And I know that Prada ain’t cheap either!  Ladies – care to put a price on this?  Would you say that 30 pairs of Manolos and 20 pairs of Pradas would average about $500/pair?

So with a $25,000 shoe collection to my right, I looked to the left and saw a sunglass collection!  Prada, D&G, Gucci, LV, Chanel – you name it, they had a pair.  Or, I should say “she” had a pair.

I have ONE pair of sunglasses, FYI.  They’re Armani, which I got on Ebay for 40% off, and they’re scratched to hell.  If I lost these, I’d probably buy a pair at Shoppers Drug Mart…

Anyways, the second bedroom of their condo was the biggest treat, in my eyes.  After seeing $25K in shoes, and what was likely $4,000 in sunglasses (ironic, because this was winter), I saw a sight that can’t possibly be explained, but I’ll try regardless.  The second bedroom was basically turned into a showroom from a clothing store – with six “racks” like you’d see here:


It was ridiculous.

Half of the damned dresses still had the tags on them!

I finally realized that I couldn’t find these guys “the right condo” because it only existed in their minds, and it probably cost about $1.5 Million, even though they wanted to spend $500,000.

I also realized that this girl, who made about $55,000 per year, was spending about $75,000 pear year on clothing, partying, travelling, and everything in between.  It doesn’t take a mathematician to figure out that there was other money coming from somewhere.  No, not drugs, but probably from the parents.

In a situation like this, it’s impossible for me to explain the concept of “fair market value,” since these two had never spent a fair dollar in their lives.  Had they worked, paid taxes, paid rent, and then taken $500 and blown it on a pair of shoes, they’d certainly understand how far a dollar goes.

We looked at a few more condos after that, but nothing ever interested them.  They actually broke up a couple weeks later, and went their separate ways.

But this was a classic example of being so far out of touch with the “value of a dollar” that you can’t possibly understand the price of real estate in Toronto.

Conversely, you have the buyer who comes from nothing, and can’t comprehend how other people spend money.

I had a client last summer who lived in a small 1-bedroom apartment with his single-mother, and wanted to buy a condo downtown as he was working in investment banking (this guy was a real success story – came from nothing, and worked his butt off!).

When I first talked to him, he told me, “I just need something simple, nothing luxurious.  I don’t need frills; I don’t need laundry, or air conditioning, just something simple.”

I explained to him that ensuite laundry was pretty standard, and he said, “It’s a waste, I don’t need it, and I don’t want to pay for it.”

I further explained that about 99% of the condos we see would have a stacked washer/dryer in the hall closet, and that seeking out a unit (or a building, really) that didn’t have ensuite laundry wouldn’t save him any money.

Interestingly, he said, “I just find it so wasteful.  I mean, a stacked washer/dryer is like twelve or fourteen hundred dollars, but I can do a load of laundry some place for two bucks.  I work a lot so I’d get away with one load per week, so a hundred bucks per year, times three or four years that I’m living in the condo – that’s what I’m getting at, right?”

Oh I get it, but that’s really digging deep!

He explained that he was coming from a rental apartment where A/C units jammed in the window cost $300 a piece from the landlord, and so he and his mom just went without one.  So he figured that he’d take all the ways he’d grown accustomed to saving money in the past few years, and try and apply that to his condo purchase.

He was an interesting guy to work with!

We’d walk into a condo, and he would just stand there and shake his head.  He’d say something like, “Do you know that this light fixture costs about $700, but only costs the retailer about $300?  The mark-up is well over 100%.  And China is the world’s largest producer of both glass and steel, which this fixture is made of, and that’s where this fixture was produced.  Also consider that labour over there is pennies an hour, and voila – you’ve got a fixture that costs $15 to produce and ship to Canada for yuppies to buy for $700.”

I certainly couldn’t argue with that.

This guy spent the first 23-years of his life learning how to get by with what he had, and he didn’t want to spend money on “somebody else’s work.”  He ended up buying a completely bare-bones unit in awful shape in a 12-year-old building (great location though), which he renovated himself for an hour each night after he was done working 12-hour days.

What a beauty.

I have five or six other stories that I could tell, just like the first one, but unfortunately I can’t say the same thing about the second one.

I certainly don’t want to paint an entire generation with the same brush, but I feel as though much of today’s younger buyer pool have unrealistic expectations.

I do my best to educate young buyers right out of the gates, and more often than not, we have a meeting of the minds, and I’m pleased with the results.

But then every once in a while, I help a young buyer make a budget and a list of financial concessions necessary to afford a condo, only to see Facebook photos of this person in Turks & Caicos, Cancun, and Punta Cana – all in the same year!  True story…

I’m an incredibly conservative guy by nature, but it took me over a decade to get to this point.

Maybe I’m being too harsh on the young 20-somethings of today.  Maybe I shouldn’t fault them for having great expectations, since it’s their parents, society, and mainstream media that has brainwashed them into thinking that Deisel jeans are necessary AND affordable!

The word “budget” used to be a noun, describing a strategic financial plan for a given period of time.

Now, the word “budget” is an adjective, describing a cheap pair of jeans that a 17-year-old wouldn’t be caught dead in…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. A Grant

    at 7:31 am

    “Maybe I’m being too harsh on the young 20-somethings of today.” Based on what I’ve seen (and your example #1), maybe it’s the parents who are equally to blame. It’s hard for kids to know the value of a dollar if they don’t have to spend it on the necessities of life – hence the dangers of living at home, as you detailed yesterday.

    P.S. – long time reader, first time poster. Really enjoy your blog.

  2. BillyO

    at 8:14 am

    Hey David, is there a place where readers could discuss pick 5? Like a comments section below similar to the ones for the blog posts – it would be better than leaving youtube comments IMO. One question about the Lawrence Park area, with a glut of homes in the $1.8M range or so, would you say the area is overvalued just a tad bit (around say $150-$200K)? Interest rates are low, yes, but all the new rules have certainly made it harder to borrow more. Interested in reading your take

    1. David Fleming

      at 9:36 am

      @ BillyO

      I’ve had several people email and ask me this question.

      The issue with Pick-5 comments is that I’m already pushing the envelope with this new feature (I’m positive that I’ll be taken to RECO eventually, but I’m ready for that), so by opening up a comments section, and allowing more people to be negative about a property, I might be seen as facilitating the “disparaging of a competitor’s listing.”

      Maybe I’m being a wimp, I dunno.

      The rules that CREA and RECO have imposed on us basically keep us from doing or saying anything about a property, ie. OUR JOBS! Unless it’s in private, behind a closed door (which in my opinion, is what Pick-5 is, but I digress…)

      I’m just testing the waters for now, but I’m certain that we’ll have a comments section eventually.

      1. BillyO

        at 5:21 pm

        Fair enough. Loving pick 5 thus far. Also, you have to do a blog on Toronto Life’s neighbourhood (all 140 of ’em) rankings. CityPlace and Lakeshore/Bathurst is ranked 12/140 while Bridle Path is like 40/140!

        1. David Fleming

          at 6:39 pm

          @ BillyO

          I was going to do a blog on the Toronto Life article, but it’s so insanely moronic, that I don’t know where to start.

          Plus, I don’t know who takes that publication seriously.

          1. ScottyP

            at 10:43 pm

            No one — and I literally mean, not one person — that I know, have ever known, or (I’d like to think) will ever know takes Toronto Life seriously. If ten people in this city read that rag regularly, that’s ten people too many.

            Toronto seems to be filled with businesses like this… ones where you can’t imagine for the life of you what type of customer would actually consume such a product, yet there these places are, still standing and (presumably) taking in revenue year after year after year. It’s like there’s this alternate society of consumers-cum-extraterrestrials who do nothing but make awful choices.

            Boston Pizza being another example. Incredibly overpriced; horrible, bile/earth quality; zero appeal. Who actually goes there? Who reads Toronto Life? Proof, my friends, that we are not alone.

  3. Megan

    at 9:11 am

    Assuming she paid full retail, the average price of the shoes is likely higher than $500/pair.

    A close friend keeps asking me to visit open houses with her. You should be glad not to have her for a client – she gives lame feedback on why she doesn’t like something and “needs” high end fixtures like granite. Much like your former clients, her budget, what she wants and reality are not really coming together.

  4. Frosty Johansen

    at 12:04 pm

    Bravo David! This and the last piece were excellent.

  5. Leigh

    at 12:52 pm

    great article! i see a lot written about my generation and it’s great not to be vilified for once.
    i think the reason you don’t see much of #2 is that not a lot of people who understand the value of a dollar can or want to buy before turning 30. i’m closer to the second example – grew up low income, went to university, now i make more than my parents. but i’ll also be paying off student loans for the next 15 years. i make very modest contributions to a tfsa so i have something to my name should i need it but after monthly necessities and the like, my condo fund gets the chop. my partner is in a better way financially so hopefully that will help us get it together sooner, but i’m 25 now and can’t find a penny for a condo fund. my future kids might have to sleep in drawers until i can find a nook for them.

  6. Cee

    at 1:16 pm

    The 2nd person reminds me of my friend in university. He would furnish his sublet with abandoned chairs he’d find on the side of the road because he felt it was wasteful to buy new ones LOL

    BTW ever since you changed blog format, I can no longer read your it on my iPhone. The red “TRB” bubble takes over the entire browser in front of everything else, and I cannot read the text. Please fix this!

    1. Darren

      at 3:26 pm

      I have the same issue with the bubble on my Android phone. Annoying..

        1. ScottyP

          at 10:32 pm

          Hang in there, readers. The new blog has some kinks in it but something tells me that David isn’t going to let them slide for long….

  7. Honeyoak

    at 1:36 pm

    David, the “reply” button seems to have disappeared in specific comments (BTW I am using chrome on my PC).

  8. Julian

    at 7:43 am

    A room full of shoes….a room full of party dresses…and you think Ma and Pa are footing the bill for that? David, David, David…..she’s somebody’s ‘niece’!

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Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

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