Generation squeeze (Z) – Cost of living : Housing

 Neuf fois plus riches

Ces modestes gains pour les ménages les plus jeunes sont loin d’avoir été de même ampleur que l’explosion de certains prix, notamment celui des maisons. En dollar de 2013, le prix moyen d’une maison au Canada est passé de 203 000 $ en 1976 à 383 000 $ en 2013. Il fallait cinq ans pour économiser les 20 % de mise de fonds nécessaire à l’achat d’une première maison, il en faut maintenant le double. Il n’est pas étonnant dans ce contexte que la proportion de ménages propriétaires de leur logement ait reculé de 42 % à 37 % chez les plus jeunes alors qu’il a augmenté de 63 % à 71 % pour les plus vieux.

Les ménages qui ont eu la chance d’acheter leurs maisons avant que ne s’envolent les prix immobiliers se retrouvent aujourd’hui avec un bel actif financier, alors que les autres doivent aussi composer avec une hypothèque plus lourde.

Au final, l’écart de richesse s’est creusé entre les plus jeunes et les plus vieux au pays, note Paul Kershaw.

Une récente étude de la Banque de Montréal a estimé qu’au début des années 80, le patrimoine du Canadien moyen de 55 ans et plus était quatre fois plus élevé que celui de son compatriote de 25 à 34 ans. Cet écart serait aujourd’hui de neuf contre un.


YOUNG PEOPLE’S INCOME RELATIVE TO THE MAJOR COST OF LIVING: HOUSING

The re-allocation of female time to the labour market over the last several decades was a response to growing commitments to gender equality, and to the stagnation in men’s incomes. While this shift may be boosting household incomes by 9 to 12 per cent for people under 45, this relatively minor boost by comparison with other age groups has not kept pace with the primary cost of living: housing.

Canadian Real Estate Association data show that the average cost of housing in

·         1976 was $202,794 (adjusted to 2013 currency).

·         $195,219 by 1980,

·         $211,092 in 2000,

·         $311,738 by 2006,

·         $357,380 by 2010,

·         $382,513 as of 2013.

Down payment is one factor in home ownership

Ø  At this rate of saving, a 25-34 year old making median full-time earnings between 1976-1980 had to work 5.3 years to save a 20 per cent down payment on an average home.

Ø  By 2006- 2010, it took the same aged person 10.1 years.

This means that socioeconomic conditions for younger Canadians deteriorated over the 35 year period to a degree that requires five years of extra work to pursue home ownership. For many, these additional years of earning come on top of several more years of postsecondary education.

Ratio of housing costs

Given the change in the ratio of housing costs and young people’s earnings, it is not surprising that home ownership is being pushed further out of reach for the 20-34 age cohort.

Their rate of home ownership dropped from 42 per cent in 1976 to 32 per cent by 2005.

Lower interest rates since then have helped to bump the home ownership rate back to 37 per cent as of 2012.

Home ownership is also down for 35-44 year olds, falling from 73 per cent in 1976 to 65 per cent.

By contrast, rates of home ownership are up slightly for the 55-64 age cohort, rising from 70 to 73 percent.

Data also show that Canadians age 65+ are continuing to stay in their owner-occupied homes more than they did a generation ago.  The rate of home ownership for seniors was 63 per cent in 1976. It is 71 per cent as of 2012.

UNEARNED WEALTH AND DEBT FROM HOUSING

The high housing prices that require younger Canadians

·         to work five years more than in 1976-1980 to save a down payment,

·         and an extra month per year to pay the mortgage,

·         are simultaneously powering the wealth accumulation of the their parents’ and grandparents’ generations.

Generation squeeze (Z) – Cost of living Housing

Table 3 uses Survey of Consumer Finance (1977) and Survey of Financial Security (2012) data to analyze how net wealth in housing and total mortgage debt has changed over time for the average person in diff erent age groups.

Age 65+

It shows that the rise in housing prices since 1977 has made the mean household headed by someone age 65+ richer by $185,202 compared to the same age person in 1977 when measuring the market value of their home minus the outstanding mortgage debt. Achieving this substantial gain required the typical household of retirees to take on slightly under $12,000 in extra mortgage debt. This works out to six cents of extra debt for every dollar in additional wealth gained.

Age 55 to 64

A similar pattern is evident for the cohort age 55 to 64. The mean household in this group reports net wealth in housing that is nearly $165,000 higher than for the same aged household in 1977. For every extra dollar of wealth produced by the housing market for the typical home headed by a 55 to 64 year old, the household accumulated 25 cents in additional debt.

Aged 35-44

The story is very different for the kids and grandchildren of these older cohorts. The typical owner-occupied home for those aged 35-44 reports an additional $98,483 in net housing wealth compared to 1977.  But to gain this extra wealth, the contemporary household had to take on an additional $116,083 in mortgage debt – or an extra $1.18 in debt for every dollar of net wealth gained.

Aged 20 to 35

The pattern is worse for those aged 20 to 35. The typical home owner reports an extra $66,678 in housing wealth, and a mean mortgage that is over $90,000 higher than in 1977 – an extra $1.35 in debt for every additional dollar in net worth.

Standpoint of fairness

Generational trends in wealth and debt accumulation from the housing market are particularly troublesome from the standpoint of fairness because the wealth gains reported by Canadians 55+ do not primarily represent smart decisions, hard work or other factors that would suggest this wealth has been ‘earned’.

There is no clear evidence that these generations purchased and consumed housing resources more cleverly and productively than did their parents’ generations. The accumulation of housing wealth by today’s aging population largely reflects good luck in the lottery of housing price trends.


Le Canada suit le même enchaînement qui a mené à la crise aux États-Unis. (1)

La crise provient de l'utilisation du crédit immobilier pour soutenir la croissance.

Quand la banque du Canada a baissé son taux directeur de 4,75 % (2007-07-10) à .5 % (2009-05-21) en moins de 2 ans.

En plus, les conditions d'obtention d'un crédit immobilier sont devenues moins contraignantes, 600 milliards de prêts par la SCHL sécurisés par le peuple.

Ce qui a provoqué un boom immobilier, avec deux conséquences.

1.      D'abord, le secteur de l'immobilier a vu ses effectifs augmenter. Les mises en chantier se multipliaient, il faut de la main-d’œuvre. Ce qui est favorable à la croissance de l'économie.

2.      Ensuite, l'augmentation des prix de l'immobilier permet aux propriétaires de contracter un crédit hypothécaire supplémentaire, même s'ils devaient déjà en rembourser un, basé sur l'augmentation de la valeur de leur maison. L'argent ainsi obtenu servait aux dépenses de consommation.

Ainsi, le crédit soutient la croissance canadienne, en soutenant le secteur de l'immobilier et la consommation. Les économistes s'accordent majoritairement pour dire qu'il s'agissait d'un cercle vertueux : le crédit alimente la consommation, ce qui alimente l'emploi, ce qui alimente la consommation et permet de rembourser les crédits, et ainsi de suite. Un cercle vertueux keynésien.

Puis, les prix de l'immobilier sont montés tellement haut, le marché se stabilise, car les maisons sont rendues trop chers, par rapport à la capacité des salaires moyens, taux d’endettement moyens 163 %.

Les effets secondaires d’avoir baisser de moitié le taux directeur

·       On a créé une belle arnaque intergénérationnelle, les papys et baby bommer vendent leurs maisons deux fois trop chères, donc, 2 fois plus de gain de capital, par contre, les jeunes paient leurs maisons 2 fois trop chers et sont 2 fois plus endettés.

Un beau transfert de richesse
à l’avantage des vieux sur le dos des jeunes.


Generation squeeze (Z)

  1. Generation squeeze (Z)
  2. Generation squeeze (Z) - Individual income
  3. Generation squeeze (Z) – Age Analysis of household earnings
  4. Generation squeeze (Z) – Cost of living : Housing
  5. Generation squeeze (Z) - Revenue and Spending, by Age
  6. Generation squeeze (Z) - Discussion