Don’t buy a $1 million home in the city. Buy a good bed instead.

Why home ownership is costly and overrated.

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Being prospective home buyer in the city is disheartening. Despite numerous efforts by the Ontario government to try and cool prices, the average home in the Toronto region still sits at just under $750,000. So sure, while home prices dropped 19% from April to August, prices still rose a total of over 33% in the first quarter alone. Real estate is still a rip-off in this town, even the condo market.

Yet every day, a common discussion amongst some of my millennial friends is the lingering sadness that they’ll “never be able to afford a house.” My question to them is “why the desperation?”

Really – why? What’s the rush as a twenty-something year old? Is it to prove to others that we are in full-blown “adulting” mode?

Homeownership is totally overrated. Let me explain:

You’ll barely use it.

Work. Commuting. Errands. Entertainment options in the city.

Chances are your home utilization rate, which I define as the amount of time spent in your home, will be appallingly low – especially in the city. Don’t believe me? Let’s do some math:

Work 40 hours a week
Commute 5 hours a week at 1 hour a day
Errands/Exercise 2.5 hours a week at 30 min a day
Entertainment 5 hours a week, assuming Friday night out on the town
TOTAL 52.5 hours a week out of the house

Now that’s 52.5 hours out of the house per week, not including weekends. What if we add sleep, which you can basically do anywhere as long as you have a comfy bed and relatively quiet surroundings?

Work 40 hours a week
Commute 5 hours a week at 1 hour a day
Errands/Exercise 2.5 hours a week at 30 min a day
Entertainment 5 hours a week at assuming Friday night out on the town
Sleep 56 hours a week at 8 hours a night
TOTAL 108.5 hours a week out of the house or unconscious

So that’s 108.5 hours where you are not experiencing the pleasures of your house. Do you know how many hours there are in a week? 168.

That means that under the assumption you never leave on weekends to visit your friends or family or do day trips, your overall conscious home utilization rate is a measly 35.4%.

35.4%! With a minimum down payment, the average monthly mortgage payment on a home on a 5-year fixed rate mortgage in Toronto is $3,333. This means you would pay $56 per hour of conscious home utilization before any other costs associated with home ownership (heating, AC, internet, etc.). Frankly, I’d rather spend $1500 on a good bed before $3,000 on a mortgage payment.

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Nice mattress > Home ownership.

So despite all the math that shows home ownership in the city as a bad idea, why do some of us millennials crave that brick box?

Myth #1: I need the space.

The yard. The living room. The dining room. I remain shocked when I go into homes with vast empty spaces devoid of a living soul. To compensate, rooms are filled with furniture that is barely sat in and books that are never read (I think of my parents home these days).

Yet, people still crave more space because it presents the potential to host gatherings or give future children the freedom to frolic. My question to you is: will that potential ever be realized? And how soon? How often will you host? And are you keeping indoors the whole time? With a Toronto mortgage, your cost per hour on your home is still going be to obscenely high, no matter how much of a homebody you are.

In a city like Toronto, the world is your oyster: the waterfront, the trails, and cultural activities to partake in. You will not have your house and suddenly become a hermit – you’ll still be out enjoying what the city has to offer!

Myth #2: Home ownership is an investment.

This is part fact, part myth. Yes, home ownership is a great way to force yourself into investing into a historically appreciating asset, but isn’t the fundamental to investing buying low and selling high? Every economist continues to warn us that the Toronto housing market is a bubble. Why can’t we listen to them?

In fact, this calculator shows that depending how much you spend on rent, as long as you invest the rest, your investments might actually outperform your “investment” into a house. While this math will vary on a case-by-case basis, you also have to remember what you’re sacrificing when owning a home: flexibility to move easily, vacations, and time (that upkeep ain’t going to take care of itself…).

Moral of the story: Home ownership is not essential. Proud you’re a renter? You’re still not safe: the concept of home utilization can still apply to you. So what can you do to improve your home utilization rate?

Option 1: Move closer to work and essential services.

Some friends of mine are great budgeters, but separate two key costs: rent and transportation. In my opinion, these costs aren’t separate: they’re one in the same.

Someone paying $1500 a month for rent who can walk to work in 15 minutes outperforms someone paying $1400 a month but takes a 30 minute subway ride. Why? Because there’s the $150 monthly transit cost that isn’t being factored in nor the price of the extra 30 minutes of commuting per day. Plus, the walker is properly going to end up in better physical shape.

This is a tactic I have always taken when deciding where to move. Currently, on foot, I’m 15 minutes from work, 10 minutes from the closest grocery store, 11 minutes from the closest cinema, and 30 minutes from Toronto’s entertainment district (or if I’m super lazy, 12 minutes by subway).

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Daily, I walk past crowded streetcars and streets on my stroll home from work.

By living closer to where we work, shop and play, we reduce congestion on roads and subway cars and create a lower carbon footprint. Think about that for a second: what’s better, driving a one-ton car to ship you and 20 pounds of groceries or walking it home and getting fitter at the same time?

Option 2: Do more from home.

Rather than let your home sit empty, what can you do to stay at home?

Some might suggest transitioning to running your own business or asking your employer what flex options are available. This is obviously harder for some to accomplish, but you can drastically reduce the cost of your home utilization by finding a way to be inside it more frequently.

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Can you ask your employer to work from home?

Another way is to begin inviting friends into your home on a more consistent basis. So rather than enjoying dinner out on the town, why not bring them in for a pot luck? Or if you’re catching up with a friend for coffee, ditch the $5.00 latte and the disposable paper cup and make them a nice cup of Joe instead.

It’s been a tactic I’ve actively pushed with my friends – if anyone suggests meeting at the bar, I’ll first invite them all into my home. A $2.50 tall boy from the local beer store sure beats a $10 pint in a loud crowded bar where you can catch mumps. Plus, if we end up moving to the bar afterwards anyway, at least I’ve reduced the need for everyone to get their fill of drinks outside. Yay for saving!

Option 3: Use less. Conserve more.

Are you subscribed to multiple subscription-based services? You’re probably oversubscribed for the amount you use them, so trim that down. Way down.

Got miniature appliances? Unplug them after each use so they’re not sucking power when you’re not at home.

Own lots of stuff? Try and sell some of it so you can reduce the number of possessions you have. Who knows, maybe you can even downsize what you’re living in!

The ways to reduce how much we consume are numerous. It all starts with the concerted effort of trimming down your overhead – especially if you’re not using what you pay for all the time. Personally, the only home subscription service I pay for is internet. All other utilities are included in my rent, but I still conserve out of principle (climate change is real, people).

At $56 per hour of conscious home ownership use, I’d rather rent, invest in a good bed, host my friends, and let the city of Toronto be my backyard.

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Author: stretchingeverydollar

Millennial trying to retire by 40. Because why not?

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