Check, check……is this thing on?

I don’t know what to say, but it’s an honour to be here!

Wait, what do you mean I can’t just copy what Chris said on Monday?!? As the team’s de facto millennial punching bag, I’ve read blogs in this space enough times to know that I’m entitled to things coming easily or even being given to me, and writing a substitute blog post should be no exception.

Do I feel obligated to disclose that I’m typing this from my Peloton, as I eat avocado toast, drink an oat-milk, double whip, non-fat, half-caffeinated, sugar-free Starbucks coffee while checking my texts on the newest version iPhone? No, no I do not.

I’m speaking tongue in cheek of course, but in preparing for writing this I did find that there are five separate instances of David uniquely blasting the consumption of avocado toast, among other “millennial” hobbies.

OK – to be honest, I do have a Peloton at home that I don’t use nearly as much as I like. It’s great for hanging laundry, however. I don’t eat avocado toast as I’m mildly allergic and it makes my mouth itchy. Until last year I used an iPhone 7. And I drink coffee at home every morning, and then usually get Tim Horton’s as it is closest to our office while also being David’s coffee of choice. I guess I’m not your quintessential stereotypical Millennial?

So let’s try this again…

Hey. How are you? I’m Matthew Morrison. Sorry to disappoint, but David is gone for a full week. You’re stuck with me. Oh, and it’s also the day after the TRREB market stats came out? Talk about a no-win situation. Sort of like being a millennial first-time home buyer in the Toronto Real Estate market, am I right? (More on this later)

I’ve been a reader of this blog on and off for about ten years. That’s when I met Dave. He was my baseball coach in high school. Yes, for you long-time readers I was once one of the infamous “baseball kids” Dave referenced many times. Dave and I stayed in touch. He became a sort of mentor to me, both personally and professionally. We’d get together throughout my university years with a few of the other “baseball kids”, and I was even one of eight baseball kids invited to his wedding. I don’t know how he managed to convince Jenna to let that happen, but a shout out to her for being so easygoing.

But how did I get here.. well following my graduation from Queen’s University, I joined the sales team at BMO Wealth Management, wholesaling Mutual Funds and ETFs. In simplest terms, my job was to convince your Investment Advisor to put our products into your portfolio. It was an amazing first job – I made lifelong friends (some of whom are now clients) and learned a ton. I worked there for four years, almost to the day. I had two different roles, and covered five different regions. However, like many jobs, for me, it became clear it was time to move on. And just when I was trying to figure out what that next job was (I was weighing something else in the financial world or something that I could transfer my sales skillset over to), I received an email from Dave one Friday afternoon that would quite literally change the rest of my life:

“When are you going to quit your job and come work for me?”

Within three minutes I had picked the phone up to call him. I remember him yelling to Chris in the office next door “Hey Chris, I told you he’d call me right away.” I didn’t know if I should feel proud or embarrassed about that. After a few weeks of deliberation and some difficult conversations, I had decided – that I was becoming a Real Estate Agent.

And now, three years and an entire global pandemic later, having developed a number of different learnings, scars, experiences, and above all a thicker skin, I’m writing a post on the blog I used to read ten years ago, hoping that there would be a reference to the aforementioned “Baseball Kids”. I guess I was a little self-centred as a teen? Fun fact: I am in fact specifically referenced in an old post. Even though I think Dave was clearly pointing out how out of touch my opinion was in telling that story, I still wore it like a badge of honour. And no, I won’t tell you which Blog Post it is.

All this preamble was done to 1) Pay homage to Dave’s legendary off-topic and long-winded intros, 2) introduce who I am and 3) set-up the topic of the day: what is it really like trying to buy the first home in this market as a millennial (or otherwise).

As the team member that works with the majority of our first-time home-buyers (condo or freehold), and someone who’s peers are going through this right now, I figured I could share some interesting insights into that first home purchase process.

What’s it like?

This probably won’t come as a surprise to any of you, so I won’t bury the lede: It’s really *bleeping* hard. I don’t say this to complain. You’ll have to trust me on this, but I completely understand why prices of homes are the way they are. Toronto has a massive imbalance of supply and demand. I also feel obliged to say here that I don’t think prices are unfair, per se, but I know most people are miffed, to say the least, about the price of Toronto Real Estate.

In an ideal world, everyone who wanted to own in Toronto could do so. I’ve had conversations with close friends of mine who said without certainty of a doubt that they will never own in Toronto, and by extension don’t intend to live in Toronto long-term. To be honest, that bums me out a lot. I wish they could live close to me forever, and I could help them with their real estate endeavours. The truth is though, either on an account of affordability in general or affordability of the certain aspects of a home they’ve decided they require, they reached the conclusion that Toronto is not for them. And as I said, that’s disappointing, but I think ultimately that’s OK.

At the risk of sounding too cold, I don’t believe anyone should simply deserve to own in Toronto. If they can, great! Market Powers are at force though, and quite frankly I sense a growing entitlement to owning a forever home or even a starter home under the age of 30 in this world-class city.

I think therein lies the biggest disconnect though. “World-class city”. Because Toronto hasn’t always been that way. In fact, I’d call Toronto a “First Generation World-Class City”. And as such, my fellow millennials and I are the first generation of Torontonians that have to pay world-class prices for Real Estate. The idea of owning Real Estate in Manhattan, or London proper, or Paris is quite frankly a pipe-dream for anyone but the most financially elite. But that’s the type of city and real estate market Toronto has been emulating and chasing down (and closing the gap on) over the past two decades or so. Just look at the net immigration numbers over the past two decades, domestic or international.

I have a client who’s brother lives in London, England and he worked and saved his entire adult life as a successful finance professional. Last month, he finally decided the time was right to stop renting and buy. That’s the amount of work and time it takes to buy a proper family home in London. In Toronto, there’s an expectation that doing so is something one should be able to do in their 20s. Why? Because that’s what our parents were able to do. And because there was a tweet that went viral last week saying that the housing market is broken because the average home in Orillia, Ontario costs the same as an average house in Los Angeles, California. And, perhaps most importantly, because the increase in value of the average home in this city has far outstripped the average wage increase over the last thirty or forty years.

But who says wages and home prices need to be intrinsically linked? Housing, like employment, is a market. No different than equities, bonds, and currencies. The Russian Ruble gets one a lot less house in Toronto than it did two months ago. One can get a lot less Apple stock for 1% of an average Toronto income these days than one could in the late 90s. Is that coldly capitalistic? Probably. But we live in a coldly capitalistic world, and the powers that be once upon a time decided that housing is no exception. Can that change? Possibly. But there is a significant vested interested, based on the portfolios of decision makers, lobbyists, and voters to keep Real Estate costs high. Organized Real Estate, as it exists, is built to favour sellers of Real Estate. Which makes the hardest transaction a buyer will ever make his or her first, and especially if you’re behind the curve in this “First Generation World-Class City”.

Sounds pretty bleak then, doesn’t it? If you’re a first-time millennial buyer though, there is hope. You can live in Toronto. How do I know? I’ve helped countless people do it over the past years.

In the spirit of being transparent, I haven’t yet done so myself. My girlfriend Madeline and I moved in together about a year ago, the first time either of us have lived with a partner. We faced many of the challenges I’ve already outlined, but I do believe we could have made it work. Buying as a couple is one of the best ways to actually make a purchase feasible in this city. We made a decision however to rent first.

We figured that there was a non-zero chance that living together would make us realize we weren’t “meant-to-be” for the rest of our lives, and our worry was owning together would make us try to make the relationship work longer than maybe was best for either of us. Or, even if we were able to make that difficult decision in a timely manner, it’s far more difficult to unwind shared ownership than it is to unwind a shared rental. So we did rent. We tried out living together. We tried out a neighbourhood new to both of us. We’ve been thrilled with both. Our plan is to buy sometime in the coming year. Did that decision cost us ~15% of market appreciation? It certainly did. But we made that decision knowing that was possible, and I think the logic was sound regardless of the outcome.

Enough about me though. How does one of my peers or one of my clients make this all work. I’ve mentioned purchasing as a couple. The problem is, not everyone has a relationship at the time they want to venture into homeownership that either exists or has the track record or future runway to support this massive undertaking. The next obvious answer I generally see – and the one that seems to be dominating the headlines – is parental financial assistance.

Say what you want about this concept, but I can tell you both anecdotally as well as by referencing countless studies that have already been linked on this blog that this strategy is happening and is happening all over the place. It makes sense. Affluent parents accelerate the exchange of part or all of the inheritance they’ve worked so hard to leave their children, and in doing so get to keep them close and witness them enjoying the fruits of said labour. All the while, they bypass probate and other potential taxable considerations on their death, and give their child a boost into this “first-generation world class” city’s Real Estate market.

But this strategy is a strategy derived from privilege, one that is only available to some. Add to that the consideration that it’s very easy to connect the dots and see that this just helps rich families get richer, and it’s not popular in all circles. So if a buyer is against it, or doesn’t have access to it, what other choices are they offered.

What about starting lower on the housing ladder? If I was to point to the most legitimate argument I’ve heard about millennial entitlement, it would probably be this: Your first home likely won’t be your forever home. If you want it to be, it almost certainly won’t be in Toronto. We all have different definitions of “affordable”, but the truth is there are residences available in this city in certain locations or of certain sizes that sell way below the “average” sale price. Sure, it’s not a detached home or even a semi-detached home south of Bloor, nor is it a 1,000 square foot condo in King West or St Lawrence Market, but one of the best things about Toronto is we have an intensely livable city, with safe, unique and cultured neighbourhoods all over. I’ve worked with countless people who have made a ton of money on paper or by selling and realizing profits by buying a condo that wasn’t their first choice.

Is it suboptimal? Perhaps. But those people made a choice. They wanted to live in Toronto, and they wanted to do so within a certain budget, and they made choices to work within those two parameters. From there, the next purchase they made offered them more flexibility after making all the money they did on Condo #1.

I’ve also worked with countless people who were able to get all they wanted by choosing to live in Newmarket, or Aurora, or Milton. Again, they chose to compromise, but when the time comes for them to pick a new house they will have the financial flexibility to be more discriminatory with the location.

Finally, there’s one other option I want to outline. What’s so wrong with renting? I have a very intelligent friend who I have an immense respect for. He’s about as well-read and disciplined on a whole slew of topics as anyone I know. To be blunt, he’s a 70-year-old man trapped in a millennial’s body. He also happens to be an Engineer who is Toronto-born and raised and was educated at Queen’s before completing a masters of Physics in Alberta. He’s long articulated to me that there’s a financial case to be made that renting is a better choice than buying.

In order to make sure I was paraphrasing him correctly, I texted him (how millennial of me). To be frank, I wasn’t expecting his response to have his lack of conviction. Typically he speaks in absolutes and can be quite argumentative. Perhaps he was afraid of not coming across nuanced online. In any event, he said the following:

“Of the literature I’ve read, being several newspaper articles and I believe there was a book too), the argument is that owning isn’t a slam dunk better option than renting, at least compared to how it is perceived”.

Even this toeing the line response however begs the question: If it isn’t the slam dunk financially better option, why are we all so desperate to make homeownership happen? I gave this some thought, I reached a few possible conclusions:

1. It’s what our parents did/expect of us (This can be rebutted by saying circumstance has changed – see: First Generation World Class City)
2. Pursuit of some version of the proverbial “American Dream”
3. Fear of missing out (again, how millennial) of future financial gains, or more instructively even the financial gains people have made in the past ten years. (Best investors I know are coulda, shoulda and woulda).
4. To show off on Instagram to our peers. “Keeping up with the Jones’s” in on steroids now in this generation, specifically because social media is so prevalent.

I think the point is though, renting isn’t so bad. Especially, and this is important given my generation’s propensity to not stay in one place for so long. As we all know, switching costs of real estate in this province are high, prohibitively high even (topic for another day). My friend said, “the argument is stronger if you aren’t strongly committed to a specific location for a long period of time”. Did he just perfectly describe a millennial? Regardless, I think the stigma against renting, or perhaps misguided desires to own, is impacting our satisfaction with our current situation, or our motivations to change said situation.

Wow. I can’t believe I typed almost 3,000 words. I’ll echo what Chris said on Monday. Hats off to Dave for doing this three times a week since the day we met on the baseball diamond at Talbot Park. Impressive, really.

I also hope I added some valuable insights here. If not, I at least hope I changed your perceptions on millennials – I think many of us get painted with an unfair brush.

A word I learned in first-year Politics was “normative”, if my memory is working correctly, it was defined as “how things ought to be”. As I’ve matured, I think I and many of my peers realized the concept of “normative” is but a fairy tale. The world we live in is anything but normative. Homeownership in Toronto is anything but normative. Whatever was once normative got smashed into a million pieces when Toronto became something of a “world-class” city.

As I said, I think that’s ok. There are ways to work around this, and if none of those options make sense, there are a ton of other fantastic places in this province, country, and world to live. And if you must live in Toronto, smarter people than I have tried to argue before that renting isn’t so bad either.

But…

If after everything I said, any millennials out there are still  ambitious or defiant enough to think homeownership in Toronto is something they want to chase, I’m left with only one question for you:

“When should we get started?”