With home prices rising and inventory shrinking, what鈥檚 a millennial to do?
It鈥檚 not an easy time to be a millennial home buyer in Vancouver. Increasingly high home sale prices, low inventory and new mortgage qualification changes have made it a challenging time for young adults to enter the local real estate market.
Market conditions in 麻豆传媒映画have millennials feeling 鈥渓eft out鈥� of the idea of home ownership, and have even caused some to consider leaving 麻豆传媒映画altogether. In a city where home ownership can feel like an impossible dream for twenty somethings, local industry professionals weigh in with their best advice for Vancouver鈥檚 millennial cohort.
Feeling Left Out
Growing housing costs in British Columbia have meant that many in the 鈥減eak鈥� millennial age bracket 鈥� meaning those currently aged 25 to 30 鈥� who want to buy a home are not able to, according to a provincial survey by Royal LePage released in August.
鈥淔acing challenges their baby-boomer parents never encountered, peak millennials are confronted with significant obstacles that vary depending on where they live,鈥� says Phil Soper, president and CEO of Royal LePage. 鈥淲hile finding employment in our largest urban markets, Toronto and Vancouver, is relatively easy compared with other areas of Canada, buyers face limited inventory and high home values in these regions.鈥�
Homeownership Rates Dropping
When compared to their baby-boomer parents, millennial buyers are slower to enter the Canadian real estate market, oftentimes opting to rent instead of buy.
According to 2016 Census data released by Statistics Canada, just over half (50.2%) of millennials who no longer lived with their parents were home owners in 2016, compared to 55.5% of baby boomers back in 1981.
StatsCan also found that in the 麻豆传媒映画Census Metropolitan Area (CMA), 麻豆传媒映画had one of the highest proportion of households (32%) whose housing costs were considered unaffordable 鈥� meaning that families were spending 30% of more of their total family income on housing costs. With conditions like these, it鈥檚 easy to see why millennials have struggled to navigate Vancouver鈥檚 real estate market.
Mortgage Matters
The federal government introduced a mortgage 鈥渟tress test鈥� last fall, which came into effect January 1. The test was once applied only to mortgage applicants of insured mortgages (those with less than 20% down), but has now been extended to all mortgage applicants to include uninsured borrowers, who make up a larger portion of the mortgage applicant pool.
The stress test requires an applicant鈥檚 income to qualify them for mortgage repayments at the Bank of Canada鈥檚 five-year posted rate 鈥� higher than the discounted rate they would pay in reality, and currently 4.99% 鈥� to create a buffer against future rate rises and any financial difficulties.
Some believe that the new stress test is a positive thing for millennial buyers. 鈥淥ver the last eight or nine years, we鈥檝e become very much used to ultra-low mortgage rates and I think that is changing,鈥� says Barry Magee, a Vancouver-based real estate agent. 鈥淲e鈥檙e going to get more back to a normal level of mortgage rates. If the government is looking out for you and adding that stress test and that extra 2% it鈥檚 probably a good thing and something millennials should listen to.鈥�
Jump In or Stay Out?
Local experts have diverging opinions when it comes to millennials entering the 麻豆传媒映画real estate market at this time.
鈥淚 definitely advise millennial buyers to be very cautious right now,鈥� says Magee. 鈥淭here are a lot of extenuating circumstances in the 麻豆传媒映画market right now that aren鈥檛 particularly sound. The market鈥檚 gone up 70% in three years and we operate in what I like to call an unregulated global speculator鈥檚 market, so I wouldn鈥檛 say it鈥檚 a great time.鈥�
However, other experts argue that there鈥檚 no better time than now to enter the real estate market as a millennial.
鈥淭here is no way to 鈥榯ime the market鈥� perfectly, so if someone is thinking about purchasing and has the means to do so, just do it! Don't wait, because we all have to live somewhere,鈥� argues local agent Lindsie Tomlinson. 鈥淚t's better to be 鈥榩aying yourself鈥� with ownership than paying rent. If the market remained completely flat (which I don't think will happen), if someone sold a few years down the road, they would come out with the equity they put into their home, instead of a pile of rent receipts.鈥�
Get Creative
With less-than-ideal market conditions, mortgage qualification changes and rising prices, embarking on the journey of home ownership can seem impossible for the millennial age group. However, experts argue that there are creative, lesser-known strategies millennials can use to take the plunge.
鈥淚f it鈥檚 possible to have your parents co-sign your mortgage for you, consider that,鈥� advises Tomlinson. 鈥淒on鈥檛 feel like you鈥檙e too proud to do that. I had to get my mom co-sign for me years ago because I wasn鈥檛 making much money at the time. I had the money saved up for my down payment and was able to afford the payments, but I didn鈥檛 make enough money so I had to have her sign. Then, when I went to renew my mortgage, I didn鈥檛 have to have her co-sign.鈥�
Buying a home with a group of friends is another creative strategy millennials can use to enter the real estate market.
鈥淏uying a condo with one or two partners is a more creative way to get into the market. That way, you鈥檙e at least in the market even if you can鈥檛 afford to buy a primary residence if you鈥檙e priced out,鈥� explains local agent Matt Scalena. 鈥淭hinking a little more creatively and combining forces with one or two other friends can work. One thing I would say is to get all of the terms spelled out before buying real estate with friends, because it鈥檚 very easy to have misunderstandings when there鈥檚 money involved.鈥�
