It appears that a drop in home affordability coupled with student loan debt is resulting in millennials taking longer to buy homes. However, things are not as bleak as some might make it seem, and paying attention to a few simple aspects can hold probable home-buying millennials in good stead.
It’s Not as Easy as it Was
If you think you’ll have it as easy as the previous generation who bought homes, think again. Take a look at the home value-to-income ratio when your parents bought a home. It would not be far off the mark to say that typical homes back-in-the-day sold for around four times the annual income of a buyer. Now, average home prices in major markets hover approximately ten times the average income level. What this means is that millennials need to plan their finances way better than previous generations.
Major Urban Centers Make it Harder Still
If you live in a city such as Toronto, Montreal, Vancouver, Calgary, or Ottawa, buying a home becomes considerably more difficult than in other parts of the country. The problem is that millennials continue to turn to major urban centers in search of greener pastures, putting even more pressure on the housing market. If you live in a big city, you might be better off taking a look at homes in the outer suburbs. For instance, if you live in Toronto, you might consider looking for homes in areas such as Victoria Park, Warden, or Kennedy.
Think of Your Purchase as an Investment
Not many millennials think about decoupling where they live and the homes they purchase. Some homebuyers actually benefit from buying homes in areas with great rental markets. They make a tidy sum through the rent they earn and continue to live in more affordable neighbourhoods. This way, they can separate their lifestyle decisions from their investment decisions.
Being Anxious is Alright
Home prices are on the rise and regulations surrounding home buying have become more stringent than before. Given that rental prices also continue to increase, make it natural for millennials to feel anxious. Many millennials have little in terms of disposable income, so saving for a down payment might seem daunting. A simple workaround is that you continue to share accommodation with family or friends for as long as you possibly can because this allows you to save more than you would if you choose to live alone.
Rent You Pay is Never Coming Back
The money you pay toward rent is money you’ll never see again. Besides, renting a house is probably the most significant expense for most millennials. When you buy a house, the money you pay toward your mortgage helps you build equity in the home.
The Buyer/Developer Disconnect
While you, as a homebuyer, might want three spacious bedrooms, most modern-day developers are looking at getting the most out of their money. As a result, the market is becoming awash with smaller units and lesser space, and these homes typically find favour with investors instead of families. This requires that you extend your search beyond new developments.
Sure, buying a house has become more expensive over the last few decades. However, if you play your card rights, the dream is still well within reach.