BC Business
All my father ever wanted was for his home, the 820-square-foot two-bedroom bungalow I grew up in, to be “clear title.” My parents bought that house on East 5th Avenue in 1953 for $7,500, and I remember like it was yesterday driving with Dad to the Royal Bank at Granville and Hastings to make the monthly mortgage payments of $54 (based on a 25-year term, 25-year amortization). Dad didn’t refinance every time the home rose in value.
That mortgage was paid off early by 1975, just as I was starting my career in real estate. By then my dad’s generation of “all I ever want is a clear-title home” was already showing signs of disappearing, their conservative expectations replaced by a new “I want to enjoy my life and not be a slave to that white picket fence” mentality. The economics of homebuying was also changing. In 1975 a starter home was going for $39,000 to $49,000, and mortgages were starting to see five-year terms. These days it’s virtually impossible to find a livable home in East Vancouver for under $500,000, while that house on East 5th is worth closer to $750,000.
Several things have changed over the decades – prices as well as the supply and type of housing available – but the key reasons I argue for getting into the real estate market remain constant. First, you cannot be a tenant all of your life. This applies more today than ever, as there’s virtually no new rental stock and thus no relief in sight for rapidly increasing rents.
Secondly, you need to invest in your own destiny to have something to sell at retirement as well as to help your own children become first-time homebuyers (it’s a vicious circle). Thirdly, you need to have something to trade with. As I often say, “You can’t play marbles without marbles”: if the market goes up, you’re already in and can participate; if the market goes down, you can sell low and buy low.
Finally, real estate is a long-term hold. You cannot speculate with your principal residence. Granted, it’s not easy to find a condo in this town for under $350,000, but that’s where some creative thinking comes into play: buying with a friend, buying a house with a rental suite (the so-called “mortgage helper”), buying a condo and forfeiting the parking stall or even getting together a group of 12 friends and buying a 12-suite apartment block (think big!). I always ask the question, “Who is the true speculator: the one who buys or the one who can buy but sits out, waiting for a collapse?” During turbulent market conditions, we struggle to see the forest for the trees. It is in times like these that there will be some real buying opportunities.
Today first-time homebuyers want to have it all, and have it all at once, whereas my parents waited 25 years before contemplating a new kitchen (a kitchen, it should be said, that cost about the same as the original house). We think about upgrading and moving every time we see a rise in the market, whereas the home-buying emphasis used to be firmly on the future and creating a safe environment for you and your family. Because my father (who died in 1991) purchased that little house on East 5th Avenue, he was able, when he sold in 1993 for $240,000, to ensure that my mother now lives comfortably and that my sister and I were able to buy our first homes and pay for weddings.
Dad almost walked away from his $200 deposit back in 1953 because Uncle Tony said that he would never live to pay it off – that he was trying to be a big shot buying a 42-foot-lot rather than a 33-foot-lot new home. The fact is, there will always be someone telling you that you can’t or shouldn’t buy. You have to trust your instincts and find a home, as well as a time, that fits. That first home is the ultimate long-term investment.