Real Estate

11 Signs Canada Housing On Verge of Collapse

A recent Bloomberg article provided a view of the deteriorating condition of the Canadian housing market. It’s dire and in my opinion will get worse because the economy is being pushed to the edge by the Covid-19 coronavirus crisis.

Housing crises are slow-motion train wrecks, so don’t expect the pain to be immediately obvious, like in the stock market. While this might seem to make it more manageable, it actually extends the economic pain. If you are unfamiliar with what a housing-led economic implosion looks like, you should brush up on what happened to the US after 2006 and Canada after 1989.

The US housing collapse took years to eventually bottom, resulting in massive economic dislocation, human suffering and a near-collapse of the global financial system. Coming out the other side of the collapse was a long, slow uphill battle for most.

Canada saw the same after its real estate bust in the early 1990s. Years of stagnation and relatively high unemployment.

Of course, in both the US and Canada the real estate bust eventually created massive opportunities for many.

The following key stats from the Bloomberg article illustrate the immediate vulnerability of the Canadian housing market and the overall Canadian economy:

1) Nearly one in three workers have applied for income support.

2) Canadian households are among the world’s most indebted.

3) Real estate has become Canada’s largest sector. Including residential construction, it accounted for 15% of economic output last year; energy accounted for 9%.

4) The City of Vancouver fears it’s heading for insolvency after it surveyed residents and found that 45% of households say they can’t pay their full mortgage next month and a quarter expect to pay less than half of their property tax bills this year.

5) Canadian households owe C$1.76 for every dollar in disposable income. In Vancouver, that spikes to about C$2.40

6) Canadians owe C$2.3 trillion in mortgages, credit card, and other consumer debt, about equal to the country’s GDP, which is an even higher ratio than the U.S. had before its housing bust.

7) If only 2% of the housing stock were to be listed for sale, it would trigger the kind of supply shock behind a 1990 crash, according to Veritas. That’s most likely to come from investors, half of whom weren’t generating enough cash to cover the cost of owning their rental properties, Veritas found in a survey last September.

9) 30% of apartment rent due April 1 went uncollected, according to estimates by CIBC Economics.

10) Nearly a third of Canada’s Airbnb hosts — who jointly had 170,000 active listings in late 2019 — need the income to avoid foreclosure or eviction, Airbnb said in a letter to the Canadian government last month.

11) Nearly 6 million Canadians have applied for income support. Lenders had deferred nearly 600,000 mortgages, about 12% of the mortgages they hold, as of April 9.

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Growing Up Gen X

Featured Image: Oscar the Grouch (arguably the Gen X mascot) with Caroll Spinney, who played him until 2015. Spinney died on December 8th, 2019. This article is dedicated to him.

If you were to believe mainstream media, the only two generations to ever exist are Baby Boomers and the children of Baby Boomers (Millennials). The world is so focused on these demographic bulges that other groups are completely ignored.

One would think a neglected demographic presents an opportunity for businesses. While executives salivate over Boomers and Millennials, few are serving the unique needs and wants of Generation X.

Who is Generation X?

Generation X is the group of people born between 1965 and 1980. The bulk of this generation were children of the 1980s. This is a smaller cohort than the Baby Boomers, explaining why they tend to be ignored – both economically and politically. Of course, ‘small’ is a relative term. There are about 65 million Gen Xers in America as of 2018. I am one of them.

Not once in my career – which is approaching 20 years – have I heard of a business strategy targeting Generation X. Not once! This strikes me as a massive gap in the marketplace.

Of course, there are industries that fulfill the needs of the current Gen X age range, but that association is purely coincidental, as opposed to strategic. For example, new single family homes tend to be purchased by people in their mid-30s, regardless of what demographic to which they happen to belong. Home builders target people in their mid-30s, not a specific generational cohort.

There are opportunities to truly service the under-serviced generation. However, to do so requires a deep understanding of the collective experiences that shape that generation’s current characteristics. Below is a summary of those experiences, some second-hand and others personal.

I encourage you to share your experiences in the comments section.

Children of Divorce

As children, Generation X saw their parents divorce at a rising rate compared to previous generations. Indeed, by the time I reached high school it seemed less common for someone my age to have married parents. Intact nuclear family structures were a rarity.

In the 1980s, divorced parents rarely had shared custody of their children. This meant that the child lived with one parent full time and saw the other on weekends, if they were lucky. Most of my friends saw their ‘other’ parent far less.

The unbalanced parenting burden created emotional and economic stress for the parent with full custody, eroding the parent-child bond. Meanwhile, because the part-time parent hardly saw their kid, interactions were usually fun and unrestricted. In the child’s eyes, the full-time parent was a tyrant and the part-time parent could do no wrong. One parent was vegetables and the other was ice cream.

These dynamics resulted in many non-traditional family structures and relationship issues that persist to this day.

Latchkey Kids

The 1980s saw women increasingly enter the workforce – particularly in the middle and upper classes. Whether divorced or not, the home tended to be empty for most of the day. While daycare existed, many kids did not attend – some for economic reasons, others because of availability. As a politically neglected generation, social programs for children were being stripped.

Consequently, many kids in the 1980s not only went to and from school alone, they returned home to an empty house.

Picture giving your six year old a key to the house so they could let themselves in after school. This was reality for many.

With this being the norm, adult supervision was absent in much of the Gen X kid’s life, compared to previous and later generations which benefited from intact families, stay at home moms, daycare and nannies. Generation X, in many respects, raised itself.

A meaningful portion of Generation X was also the children of Vietnam vets and crack heads. A combination of PTSD, inebriation and death removed the father from many families that needed them the most.

This created a very independent generation. It also created a situation not unlike Lord of the Flies, with rampant bullying and stupidity. The law of the jungle prevailed.

This went beyond kid-to-kid interactions. Since latchkey kids were left on their own so much, they became easy prey for adult pervs. Gen X kids were fully aware (and warned) of child abductions, but they were on their own to deal with them. The reality was that abductions were still rare, but the fear remained palpable. There are several high profile cases of kids who were my age at the time going missing. In all these cases, the kids were unsupervised.

Some of these kids made it through the filter to become emotionally healthy and independent adults. Many did not.

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We Were All Going to Die Part 1: Nuclear Annihilation

While not the first generation to live under the dark clouds of the cold war, Generation X was the first to be completely helpless from birth to (eventual) death.

During the early stages of the cold war, Baby Boomers were taught how to survive a nuclear war. Generation X was taught to hope they don’t survive. Baby Boomers also grew up believing they could stop nuclear proliferation. With time, however, Baby Boomers’ anti-war idealism morphed and they elected Republicans. Consequently, Generation X spent its childhood watching Reagan’s unstoppable massive buildup of nuclear weapons, knowing the extermination of humankind was at the press of a button.

There were many popular songs made in the 1980s about the cold war and nuclear apocalypse: 99 Red Balloons (Nena), Guns in the Sky (INXS), Nikita (Elton John), It’s a Mistake (Men at Work), Forever Young (Alphaville), and so on. To this day, Mad Max (1979) is the reference people use to describe a post-apocalyptic world. Also released around that time (1984) was the scariest mockumentary ever made: Threads.

This was pop culture based on impending doom. Gen X grew up in the shadow of fear.

Since birth, Generation X has lived at the whims of others and the hope that cool heads prevail. If there’s anything that explains the generation’s cynical ‘fuck it, I don’t care’ attitude, it’s the persistent worry of nuclear annihilation. Of course, this is oversimplifying. Generation X cynicism is caused by a combination of general disappointments in humanity.

As Generation X approached adulthood, the cold war came to a close. Russia and the former Soviet Republics suddenly became allies we needed to assist through the transition to democracy. Without an enemy hidden behind an iron curtain of secrecy, the threat of nuclear war declined and the Doomsday Clock was turned back to 17 minutes to midnight by 1991. During the peak of the cold war in 1984, it stood at 3 minutes to midnight.

With the Doomsday Clock currently back at 2 minutes to midnight due to inaction over climate change and the (once again) threat of nuclear war, I wonder if today’s kids will grow up with the same cynicism as Generation X.

We Were All Going to Die Part II: AIDS

If you have sex you will die. That was what Generation X was taught as we came of age during the late 1980s. When you tell a kid something will kill them enough times, you will have a lasting impact on their behaviour and attitudes.

The AIDS epidemic created mass panic during the 1980s because people didn’t know how it was transmitted. Until more was known, AIDS patients were ostracized, even by the medical teams treating them. The disease was a death sentence, putting a halt to the sexual revolution in which Baby Boomers actively participated.

Because AIDS is more easily transmitted via anal sex, it was rampant in the gay community. In the early years, it was referred to as the ‘gay plague’. The disease destroyed gay communities as older gay Gen Xers (and younger Baby Boomers) saw many of their friends die. I speculate that AIDS slowed the acceptance of gay men and women in general society – either because people feared the disease or because of ultra-religious convictions that AIDS was a curse from god.

People still had sex during the 1990s. But promiscuity and casual encounters declined considerably. Monogamy became the norm for Generation X.

The Birth of Grunge and Hip Hop

Out of Generation X’s chemical soup of cynicism, nihilism and angst arose new forms of self expression. The two most notable being grunge and hip hop, which overflowed with testosterone – both an outward projection of internal struggle, disenfranchisement and anger.

In particular, the destruction of inner-city New York City during the 1970s and the crack epidemic of the 1980s combined with cultural isolation and helplessness to cause black youth to take matters to the street corners. Rapping arose from street culture but it was also the antithesis to street life, providing a non-violent outlet for rivalries and an alternative to drug dealing. Intertwined with the other elements of hip hop – graffiti, breakdancing and DJing – a cultural phenomenon was born and soon spread outward. The message of poverty and struggle resonated with a large part of Generation X, which could relate – even from the suburbs.

Technological Transformation

Generation X witnessed the demise of the typewriter and the birth of the personal computer. With relative ease, we transitioned from the Dewey Decimal System to, books to iPads and rotary phones to smart phones.

While Baby Boomers also experienced these changes, most were too used to the analogue world to easily transition and were late adopters. Baby Boomers are now technologically capable, but lack the digital instincts of younger generations. In contrast, Millennials and Gen Z were born in a digital world. This is all they know and what they’re used to.

Generation X is uniquely positioned to straddle the analogue world of Baby Boomers and the digital world of Millennials, allowing them to relate to both worlds.

I’m sure there is tons of stuff I’m missing. There is probably enough to fill a book. I’d love to hear about your views on this. Please share your thoughts on the Gen X experience to the comments section below!