Episode 8: Kelley Keehn – Making Sense of Money and Real Estate in Today’s Economic Climate

REAL TIME Podcast

In Episode 8 of REAL TIME, popular personal finance expert and award-winning author Kelley Keehn discusses the financial concerns and realities facing many Canadians today, including homeowners and prospective home buyers. Discover tips and tools for REALTORS® to help your clients assess and strengthen their financial health, even in unstable times.

Transcript

Erin: Welcome to episode eight of REAL TIME, a podcast for REALTORS® brought to you by CREA, the Canadian Real Estate Association. We're all about ideas surrounding Canadian real estate and topics that impact you as a REALTOR® and really, all of us. There's some great family advice here today too.

I'm your host, Erin Davis and we're sitting down today with Kelley Keehn, best-selling author, 10 books, personal finance educator, guest from CTVs Marilyn Denis Show, BNN and on FP Canada to name a few platforms where she shares her wisdom. She's an advisor who confesses to having a buy bias, which is definitely good news for you. Here we go.

Oh, Kelley, what a pleasure it is to have you with us here today, as we make our way through a year that has been so full of surprises. What's the first thing I'm going to ask you to do? Make a prediction.

Something nobody wanted to do as this year has gone on, but jeez, if we start with some context, in 2016, about two-thirds of Canadian families owned their own homes and that was up from 60% in 1999. Do you expect these numbers to continue to increase or to decrease? What do you foresee for the future, if anybody could dare have any predictions this year?

Kelley: Erin, it's so great to be with you and that is the burning question, isn't it? What is going to happen with housing? Now, I'm not an economist, so I'm just making some very humble guesstimates here. It's so tough because this isn't just a recession, or a typical crisis like we went through with the financial crisis. This is so different. We're all done with the unprecedented term that we hear every single day, every single hour, but it really is. When we were listening to all the news reports in March, in April, there was all these forecasts for housing to drop, different economists talking about different percentages, but it was in the low double digits and we've seen anything but.

We've seen July housing sales soar, Toronto housing soar. What is going to happen in the next quarter? What is going to happen next year is anyone's guess. Some of the big question marks are once the government assistance dries up, when will it dry up, it keeps getting extended? We don't know, but when that does dry up, how will Canadians handle their housing payments? Will we see delinquencies rise and people actually having to sell their house? With borders still shut, we're not seeing the immigration that's needed for increased sales. I don't know, it's certainly going to be the thing to watch.

Then also with the other question mark of how many renters actually want to become homeowners. A new survey revealed that 14% say that because of COVID, they want to purchase a home in the next year. That's double the 7% reported last year. A lot of unknowns and we'll all be watching very closely.

Erin: Kelley, with the August numbers just out of the GTA, for example, the only segment that wasn't on fire, so to speak, was in condos. Now, do you think that what you just spoke to and that is the 14% of renters who say, "Yes, it's time to stop renting, I want to start buying." Do you think that that could be the catalyst in the condo market, that that might be the next big thing?

Kelley: It could be. That could go both ways, Erin, is a lot of homeowners, a lot of people wanting to ensure that they have the safety of having a home. I hear from so many young folks that, now, this was pre-COVID, that were being ousted from-- They would sign a six-month lease, then their property was wanting to be converted to an Airbnb, they were kicked out. Then they kept facing increased rents every time they moved and of course, all the expenses with it. Now, some of the other younger folks that I'm talking to and just those in condos period in Toronto, are now during COVID have been isolated in this small box in the sky, their offices are closed, they don't have that yard to get out there.

They have elevators that they're navigating being in the same small space with other humans. They're considering moving out of town or getting a home that's out of the GTA, which they never would have had that conversation pre-COVID. Certainly, I think almost all of us are reexamining our housing issues and what makes sense moving forward probably in a way that we never have ever before.

Erin: Yes, you're so right. Sarah Richardson told us in our most recent podcast that our homes have had to multitask as everything, our gym, our restaurant, our office, of course, our asylum, our classroom for so many and we are all reexamining our living space. Now you are, I would say, an expert in this. Kelley Keehn has written the best-selling book, Talk Money to Me and Save Well, Spend Some, and Feel Good About Your Money, Simon & Schuster. You must have a lot of millennials asking you the question, is real estate still a wise financial investment as it was for their parents and their grandparents?

Kelley: That is such a question on so many people's minds. Let's unpack that a little bit, especially when we use the word investment because an investment is something that you are purchasing with the hope that it's going to appreciate that you are going to liquidate for your retirement. I know it sounds a little pedantic that I would go into that because an asset is something very different, an asset is something that you hope will appreciate. Erin, it's a very important question. Let's unpack it this way, if you are looking at real estate as your primary residence and then let's unpack it as an investment, it's something that you're looking at something to appreciate as opposed to going into the stock market or ETFs or something like that.

Let's first look at it as your principal residence. There are so many benefits to homeownership that I think a lot of millennials just said, "Hey, I'm never going to be able to afford it. It's too expensive. It's not for me." Now we're saying, "Whoa, if this is perhaps the new trend, the work at home trend and even when things get back to normal--" A lot of companies are saying they're not going to require their employees to be in full-time in the office. It might just be two days a week. Now that's a whole different conversation of, is it a good idea? Let's just strip the investment question off because you need somewhere to live.

If you can get in and it's a reasonable parallel to what your rent would be, it's forced savings. Now, the theory my friend, Rob Carrick at The Globe and Mail, he has often presented the case that renting can actually be better than buying. I get where he's coming from. I do have a buy bias. I do, I've always been interested in real estate. If it appreciates, that's great, but even if it just stays at status quo when you-- Because if you sell, you still have to buy at the higher price and theoretically you're going to retire in a home. I think if you strip away the investment side of it, real estate can really make sense if you look at all those pros and cons.

Now, if we're talking investment-wise, I think you have to do a lot more research. You need to do your due diligence because now you've got leverage that isn't your principal residence. That means that you're borrowing money for an investment. Are you able to be a property manager? Are you able to be a landlord? Now, if we're even just talking about a cottage, you want to crunch the numbers, make sure that you're using it enough, all that type of stuff. Then again, if I can just quickly go back to the principal residents, if and when you do sell, if let's say, then you decide to, I don't know, go into a retirement community or rent or something of that sort, it is tax-free of what your increase was.

I think there are a lot of compelling cases for homeownership, regardless of COVID, but I certainly think that COVID is going to-- The pendulum is going to swing for a lot of people to figure out how can they get in the market even if it still is expensive for a lot of young folks.

Erin: Back with financial expert, Kelley Keehn, in just a second and the best advice she's got for newbies just entering the market as a buyer. This is so worth sharing with prospective buyers, so please do. Oh, and we mentioned Sarah Richardson there in our chat. If you missed podcast episode seven with the HGTV design goddess, it's easy to find. I promise you'll be glad you did. Just make sure you subscribed to our REAL TIME podcast series. Don't miss an episode, click to subscribe. Back to author, speaker and our REAL TIME guest, Kelley Keehn. Guess what? She's got her own amazing website, kelleykeehn.com. That's Kelley, K-E-L-L-E-Y, Keehn, K-E-E-H-N.com.

She's the author of 10 books, but she's just found one of our favourite apps plus more great tips. Let's talk about the people who are deciding to come out of self-isolation and dip their toes into purchasing then. Kelley, what advice would you give to somebody who's just starting to look at maybe stepping on that first rung of the property ladder? How do they do so responsibly?

Kelley: That's such an important question, Erin, because a lot of people feel that, first of all, if they're renting, I just hear these myths, it's just so expensive, millennials

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