Bubbles can go on for a long time. Canada’s real estate, especially in Vancouver and Toronto, have been bubbling for quite some time; many years in fact. I don’t possess a crystal ball that will tell me the future. So I have no idea when it pops. All I have is common sense.
So I was perusing Google Trends recently and decided to plug in a few terms related to Canada’s real estate bubble and bankruptcy. Oh, hi. It’s been awhile. The nose is at 99% healed since the surgery in December – nose is great, life changing. The eyes are at around 95% healed since the laser eye surgery in March – eyes are great, life changing. Finished the pilot Valuation online certificate through NYU – spectacularly imploded and failed the final exam but redeemed myself on the valuation project to pass the program with high honours in the 60ish percentish final grade range. Since the course ended in May, I have had very little interest in any type of learning outside of casual reading. Time’s been filled with outdoor fun since June. Alright, with the little life update out of the way, let’s dive into some interesting data.
I was looking at the hourly wages at my job back in 1992 in an old contract. When you adjust the hourly wage to 2016 dollars, there has literally been no real – i.e. inflation adjusted – growth in the hourly wage for over 24 years. What you could buy with an hours’ worth of work back in 1992 buys you the same amount of goods with 2016 dollars. Or put another way…
Buying a home is one of the biggest financial decisions most people will ever make. Taking on hundreds of thousands of dollars worth of debt to purchase a home is an immense decision that shouldn’t be approached casually. There are a myriad of factors you must consider before leveraging so much money for a single, illiquid asset. This is especially important in a “hot” real estate market like Vancouver.
This post is for a friend who asked me to punch some numbers to figure out what makes more financial sense: accelerated mortgage payments or minimum mortgage payments supplemented with investing. Let’s explore what might make more financial sense.
The renting vs. buying debate is pumped full of anecdotes, opinions, and a lot of noise. Typically, people tend to make blanket statements about how buying is the winner’s game and renting is the loser’s game. With some simple mathematics and analysis, I’ll demonstrate why buying a home isn’t always the correct choice and how we will save $13,000 over 5 years by renting rather than buying.