Unlocking The Keys To Effective Home Ownership: How Psychology Can Help Us Redefine Success

The dream of home ownership, a symbol of success passed down through generations, has transformed from an achievable goal for our parents and grandparents, to an unattainable dream for millennials and Gen-Z. Over the years, housing costs have surged while wages have remained relatively stagnant. As a result, many find themselves trapped in a cycle of high rents and unaffordable mortgages, questioning whether owning a home is within reach.

THE PROBLEM

A recent survey of 2,003 Canadian millennials conducted by Royal LePage revealed that almost two thirds are optimistic about one day becoming a homeowner, but 52% say they will be forced to relocate in order to do so. Further, 44% of respondents do not think their wage will increase enough for them to afford a house in their current location. The survey also found that 25% of respondents truly believed they would never own a home. A 2020 international study by Money.co.uk found the average first-time buyer age in Canada to be 36 years old. These statistics reflect the prevailing anxiety within these generations, as they work longer and harder to attain the dream of home ownership or choose to remain perpetual renters.

In major metropolitan areas, where the cost of home ownership continues to rise, this dream becomes increasingly elusive for a significant portion of the population. The constant media coverage of the housing crisis in North America, combined with the urgency to achieve the “American Dream,” can create psychological barriers that hinder the pursuit of home ownership. As these challenges persist, it's crucial to understand the psychological mindsets that keep people feeling stuck, as well as strategies that can help bridge the gap between the dream of owning a home and its real-world attainability.

THE PSYCHOLOGICAL IMPACT

1. The Peril of Learned Helplessness: Learned helplessness is a psychological concept that describes when individuals believe they have no control over their situation, even when opportunities for change actually exist. In the context of housing, many genuinely feel that owning a home is impossible, so why even try? This mindset can lead to a self-fulfilling prophecy, where people don't take the any of the necessary steps to improve their situation.

2. Anxiety, Fear and Avoidance: The anxiety and fear that stem from this housing dilemma are palpable. People worry that renting is simply throwing money away, and yet saving for a downpayment on a house can feel useless, as housing prices often grow faster than savings rates. This can lead to chronic stress, poor coping mechanisms, and avoidance behaviour.

3. Low Self-esteem and Self-worth: The inability to own a home can impact an individual's self-esteem and sense of identity. In our culture, owning a home is often associated with success and stability. When this milestone remains out of reach, it can lead to feelings of inadequacy and the perception that one is falling behind in life. This can have a significant psychological impact, affecting self-worth and confidence, particularly when one sees their peers owning properties in social media.

4. Impulsive and risky behaviour: FOMO and the urgency to hit certain milestones by certain ages can lead to riskier and impulsive financial investments. Individuals may be more prone to investing in high-risk assets without thorough research, seeking quick, substantial returns. This behavior can result in significant financial losses, hindering progress toward homeownership.

SO WHAT CAN BE DONE?

Short of jumping in a time machine or browsing the sheds at Home Depot, what can a GenZer realistically do to achieve their goals and not be burdened by anxiety, shame and a feeling of helplessness?

1. Change that Mindset: Learned helplessness, anxiety and low self-worth are major roadblocks to success, not only when it comes to housing but life in general. Break free from this mindset not by overanalyzing things, but by taking action. Each small step you take towards financial stability and homeownership can boost your confidence and provide a sense of control. Don't let fear and anxiety dictate your choices; instead, focus on setting achievable goals and working towards them. Make a plan now.

2. Invest. Invest. Invest. By investing early, you have the power of time and compound interest on your side, and you’ll be amazed by what you can accomplish by starting NOW. Find ways you can automatically invest your paycheque and choose low cost, diversified ETFs. By investing wisely for the long term, you can mitigate the dilemma of increasing home prices and inflation.

3. Utilize Government Incentives: In Canada, If you are buying your first home, the government will allow you to withdraw funds from your RRSP tax free and starting in 2023, you can now invest in a First Home Savings Account (FHSA). Understand and utilizing these accounts can save you thousands of dollars on your downpayment!

4. Embrace Geographic Arbitrage: One strategy to overcome the housing dilemma is geographic arbitrage. This approach involves considering other cities or regions where the cost of living and housing prices are more reasonable. It might mean moving to a different city or region, where your income can go further and homeownership is more achievable. Be open to exploring new opportunities beyond your current location. Why bust your butt trying to own a home in an unaffordable city, when you can consider lower cost cities and actually enjoy life!

5. Think Outside the Housing Box: In today's ever-evolving housing landscape, it's crucial to think beyond traditional home ownership. Explore innovative housing solutions that can provide financial security and a sense of home without the conventional ownership burdens. These include co-housing arrangements, rent-to-own programs, tiny homes, real estate investment groups, and shared equity models. By embracing these alternatives, people can find paths to stability, community, and fulfillment, even if traditional ownership seems out of reach.

6. Flip the Script on “Success”: Success isn't solely defined by homeownership. It's essential to shift the narrative and recognize that there are various paths to fulfillment and financial stability. Focusing on building a career, investing wisely, and saving for the future can be just as rewarding as owning a home. Understand that your worth is not determined by the property you own. For example, a lot more people are looking into renting putting their money elsewhere.

CONCLUSION

In conclusion, the dream of home ownership has shifted for millennials and Gen-Z due to ever increasing housing costs and stagnant wages, resulting in psychological stress and a feeling of helplessness. But not all is lost. To overcome these challenges, first change that mindset, start investing for the long term, and understand tax rules that can help make home ownership a reality. Consider living in more affordable but high quality of life areas and don’t rule out other innovative housing solutions, such as co-housing or shared equity models, even if it’s just for the short term. More importantly, try not to tie your “success” and self-worth to property ownership. In many ways, this is what the home industry has been pushing on us relentlessly, and has also been contributing to skyrocketing prices. Remember, success is not just the home you live in, but the life you actually build.