A Helping Hand In The Housing Market – Toronto Realty Blog
As a 40-year-old man, I can personally attest to just how interesting the child-parent relationship is.
I’ve rounded that corner – the one where you cease to become the one who needs to be provided for, and instead, becomes the provider. Many of you can relate, and from a variety of ages, I’m sure.
Watching my mother or my father play with my two children is a real trip. It’s like watching an older version of my parents play with me, forty years ago. They’ve both mellowed, as people do in their 60’s and 70’s, and the kids worship them. It’s a beautiful relationship. It’s so innocent and pure.
The phases of the child-parent relationship seem to lose a level of dependence as the child gets older. You begin your life in an utterly helpless state, rely on your parents for anything and everything for a decade, and only then are you really able to fend for yourself in some areas of life. But for the necessities – food, clothing, shelter, most rely on their parents until they’re technically “adults,” and some continue to do so for far, far longer.
When I bought my first condo, I put everything I had into it. Money I had saved from childhood. Money I made working in the meat department at Bruno’s Fine Foods and the fish department at Dominion, pumping gas at Sunoco, waiting tables at East Side Marios, bartending at Shark City, from my infamous 2001 internship at Celestica, and from those entrepreneurial years that I spent selling concert and sporting event tickets on eBay and speculating on this new thing called the “X-Box” for which there was a massive shortage before Christmas, 2001.
And as I wrote on this blog a long, long time ago, I also had a little financial help from my mother when I bought my first condo. I blew through about $60,000 to get started in real estate, which was a lot at the time, and of course, I had years earlier lost my $25,000 life savings in the stock market during the tech bust. But I wanted to put down 25-30% on my first condo, and I was short. Not by much, but enough to ask my mother.
Sixteen-years later, both of my parents are aware that it’s now my job to take care of them. They won’t pay for anything, ever again. Not dinners, not trips, not hobbies, not repairs on the house; nothing.
The circle of life is interesting.
I have a long, long memory. My friends know me for it. My oldest memory takes place in September of 1982, which would have made me 25-months-old. I was rolling on the carpet in the hallway of our house at 128 Parkhurst Boulevard, and I stuck a pen up my nose. The cap dislodged and wedged in there, and my parents had to rush me to the doctor at Avenue & Lawrence to remove the pen cap – all this, just an hour before my uncle Matty’s wedding.
Since then, my parents have nurtured me, provided for me, housed me, clothed me, taught me, given me a university eductation, and helped me become an adult.
Now I’m going to pay it back to them for the rest of their lives. I’m going to spoil them at every opportunity.
My trolls might give me shit now – for having parents who paid for things, or for needing money for a down payment when condos were only $350,000, and that’s fine. Go for it.
But my life is an open book on TRB, always has been. And to introduce a topic like this one – the intersection of parents and real estate, what better than to start with my own story?
I’d love to hear from the readers on this too.
The more interesting stories might go back a ways…
Throughout my career, one of the very few constants has been buyers receiving financial help from their parents.
As early as I can remember, this has been the case, and I’ve seen everything arrangement you can think of.
I’ve seen parents give their kids $5,000, $10,000, or $1,000,000.
I’ve seen parents loan their kids the same amount.
One of my friends was loaned money from his father, who charged my friend 5.79% interest, compounded semi-annually, every single month. When interest rates dropped as low as 4.99% (for a 5-year fixed), my friend asked his father to reduce his payments, only to have his father say, “You clearly don’t understand how mortgages work. Go ask a bank for the same reduction, and see what they say.”
I’ve had 19-year-old clients receive financial help from their parents and I’ve seen 46-year-old clients receive financial help from their parents.
I can tell you about a lot of hard-working, debt-paying-off, 30-somethings who needed money from mom and dad to afford their bachelor condo, but I can also tell you about spoiled-rotten, unemployed, trust-fund kids whose parents buy them $2,000,000 properties in cash.
Like I said, I’ve seen it all.
And as is often the case, we’re seeing some rather timely media about the idea of parents and how they help their kids buy real estate.
Tell me if you’ve seen this billboard downtown:
One of my clients emailed it to me last week, and it wasn’t long before the billboard made the news!
“‘Have You Tried Finding Richer Parents?’ Sarcastic Billboard About Housing Crisis Goes Up In Toronto”
That’s a Toronto Star article from last Friday.
The article explains that this billboard was put up by an advocacy group appropriately called “Canada Housing Crisis.”
The group is raising money through GoFundMe to pay for these billboards, and it looks as though the group lives on Reddit.
I have no problem with their mandate: to raise awareness, and to “see common sense housing laws.”
There’s not a lot of data on this group, nor quotes to analyze, so while I’m dying to speculate about how they feel the housing crisis should be handled, I won’t. Not today, at least.
The billboard is sarcastic, but within that sarcasm, there’s a truth: that many Canadians are only in the housing market because of their parents. By extension, many home-owners only own their homes because of how, where, and to whom they were born.
But this is like so many other facets of life. I wake up every day and realize that I am where I am, in part, because my parents lived in Toronto, when I was born, and not some place else where I wouldn’t enjoy the same advantages in every day life. Where you are born, when you are born, and to whom are three things you can’t control, but which have a larger impact on your life than just about anything else.
So I see the merit of this billboard’s message, but I also see the attempt at shame.
We could shame anybody for just about anything out there. But we don’t punch attractive people in the face to let them know that other people are ugly, nor do we attempt to use legislation to create a world where they aren’t as good-looking.
I commend the creators of this billboard for drawing attention, but nothing more.
Last weekend, this article appeared in the Globe & Mail:
“Wealth Shifts To Next Generation As Parents Help Kids With Down Payments”
For starters, this isn’t a new fad.
This has been happening, as noted above, for the near-two-decades that I’ve been in this racket.
A few notable points from the article:
Laura Martin, chief operating officer of mortgage brokerage Matrix Mortgage Global, estimates that 60 per cent of her millennial clients are getting some help from their parents, either with the down payment or as co-signors of a mortgage, which puts parents on the hook for the monthly payments if their child is unable to make them.
Neither Statistics Canada nor Canada Mortgage and Housing Corp. track intergenerational wealth transfers. But the Rennie Goup, a Vancouver-based real estate brokerage and research group, estimates that about 70 per cent of Canadian homeowners over the age of 65 are mortgage free and hold $1.2-trillion in equity in their homes.
Think of all the blog posts I’ve written about how historical indicators of a market’s health, particularly, 1) debt-to-income ratio, and, 2) ratio of income appreciation to housing appreciation, no longer apply in today’s society because the largest transfer of wealth in the history of mankind is happening as baby-boomers give money to their children.
I’ve said that, what, a few dozen times?
Only now because it’s been written in the Globe & Mail, are the masses beginning to understand?
I had a client once tell me that she was buying a condo “with her inheritance.”
Naturally, I said, “Oh my, I’m so sorry for your loss,” to which she replied, “Oh, don’t worry, my parents aren’t dead yet.”
I was kind of stumped. I had always been under the impression that inheritance occurs when somebody dies and leaves you money, but it was soon explained to me that my client’s parents figured that, since they would be leaving her money one day, that day might as well be today.
Huh.
It sounds a bit odd, given the lack of death, which I thought was a major part of an inheritance, but the logic is sound.
If your parents have $300,000 in cash that they’re going to leave you when they die, could you make more use of that money now? I don’t mean “use” as in blowing it on bottle service at nightclubs and throwing it down on 24-Black on the roulette wheel, but rather putting it to use for present-day shelter and future-investment?
Sounds like a good idea, but is this coddling? Is this standing in the way of children “pounding the pavement” or “learning the value of a dollar?”
What’s the difference between giving a child their inheritance twenty years before you die, versus simply giving them a cheque?
There is no difference.
It’s simply semantics.
“I gave my child $50,000 for a down payment on a house” versus “I decided to allow my child to access his inheritance early, so that he may use it for a down payment on a house.”
Tomato, tomaaaaato…….
There are many, many ways in which a parent can help a child own real estate, from handing them money (called an “inheritance” or not), to loaning them money, to taking equity out of their existing home, to going on title to the property with them.
I’ve seen all of these methods used.
So my question is simply: how does this make you feel?
Is it unfair?
There’s a large portion of society, including those who produced the billboard above, who think it might be.
“Unfair” is a matter of opinion. There is simply no definition of the word, beyond “not fair,” that could help us to determine whether parents helping their children purchase real estate is fair or not.
There are some folks out there who are my age and haven’t worked a day in their lives. They won the genetic lottery. What can we say about that?
But are we, as individuals, envious house buyers, or as a society as a whole, going to resort to shaming home owners to feel better about happenstance?
I fail to see how this solves problems in the housing market, and it simply seeks to make financial help from parents a dirty little secret moving forward, even though, per the article above, 60% of millennials are receiving assistance.
I thought 2021 was supposed to be about positivity, celebrating everyone, and anti-shaming?
Or maybe this falls into a different category?
In any event, to end this blog on a positive note, please share your stories about how your parents were involved in your home-buying experience! No judgement here. I think the billboard folks are stuck in a sub-Reddit somewhere…
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