The payback

From time to time this pathetic blog has sought to remind you that buying real estate is emotional. Not rational. At least in the big metro areas.

If building wealth and being financially secure, free and independent are your goals, rent. If you want your MIL to love you more and you believe babies need back yards, buy. Just don’t try to cover up the mistake by calling it “an investment.” It ain’t. Houses in cities are now money pits.

I was reminded of this in recent days by a report from the US house-tracking and selling site Zillow. A new analysis there said it now takes the average new American homeowner 15 years, “to break even on the purchase relative to renting.”

And this is based on a buyer having a 20% downpayment – which is substantially higher than the average of 11% in Canada. As well, US house prices are lower, while mortgage rates are higher. Mortgage interest may be deductible there, but property taxes are generally stiffer. It’s not apples-for-apples, but the math for first-time buyers is cruel in both nations.

By the way, to buy you need (a) a downpayment or (b) parents you can Hoover the money from.

If you have to save it yourself (ugh) the process can be lengthy. To gather enough for a minimal downpayment on a condo in Toronto or Van takes the average newbie buyer about six years. But for detached home, this has turned into a virtual impossibility.

The National Bank’s Affordability Monitor claims a median-income household needs 25 to 28 years to accumulate a 20% downpayment in Toronto ($300,000) and between 31 and 37 years in Vancouver ($360,000). Of course, by the time two or three decades of saving have passed you buy, the house probably costs a lot more. So, it’s all a zero.

In contrast, a renter saving and investing the same amount for 25 or 30 years would have no real estate equity, but north of $2 million in liquid assets. That would be enough to throw off about ten thousand dollars a month for life, while owning an maintaining a home would be a net cash drag – unless there was consistent price appreciation, leading to capital gains. Lately it’s been the opposite.

Zillow also ranked cities by how long it takes buyers to break even. As we know, the GTA and LM are akin to California, so this is interesting:

San Jose, 49.2 year
San Francisco, 46.9 years
San Diego, 40.4 years
Los Angeles, 37.7 years

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The cheapest places in the US to live where the time to break even is the shortest:

Pittsburgh, 11.1 years
Detroit, 11.4 years
Indianapolis, 11.5 years
Cincinnati, 12.2 years

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If you’ve ever been in typical residential areas in Pittsburgh or Detroit, you understand what Zillow is saying. Prices there have been on a down-escalator for years. Abandoned properties are a major municipal problem. Populations have been decreasing. Real estate is a sinkhole.

By the way, I asked one of those AI thingies to calculate how long it would take a household with a median income to break even after buying an average-priced property in Toronto. Here is the answer:

In Toronto, a household with an average income will never break even on an average single-family home because they cannot qualify to purchase it in the first place.

True. The average single-family home in the Big Smoke – even after the decline of the last four years – sits at $1.36 million. The average Toronto household income is $121,000. And current five-year mortgages remain at just over 4%. All that means to buy the average, boring, unspectacular, basic single-family detached digs takes an income of $270,000 – and that is after gathering together a downpayment of close to $400,000, including closing costs.

Worse, that property is still gently depreciating. The Toronto real estate cartel reports that last month the composite benchmark price was 4.5% lower than a year ago, with the average selling price down from August of 2025 by about 3%.

Yes, that’s a 3% loss in capital value during a year in which inflation was 2.8%. The real loss, therefore, was almost 6% – on a property that took ages to save for and a massive income to carry.

Meanwhile average rents in Toronto have declined by 11.8% over the last two years. In the same period major stock markets have gained an average of 46%.

Your MIL can wait.

About the picture: “This is Daisy, my buddy’s elderly Golden,” writes Peter, in BC. “She is conflicted here; she has been trained to chase these things out of the vegetable garden, and now a baby one wants some mothering. She went along with it for a few days, then her training kicked in. Nice blog. We have a winner with our new PM.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/09/09/the-payback/