Is home ownership in Metro Vancouver still a reality for young buyers?
The Local Housing Market Remains Hot
The last half year, we have seen consecutive month of year-over-year home sales growth along with escalating prices across the region. Until recently the inventory was low and driving up the competition an now we are starting to see more homes being listed as many new sellers try to cash in and be a part of this sizzling hot market. Mortgage rates remain at ultra-low rates with a forecast to remain that way for quite some time and giving home shoppers more buying power to create a monthly mortgage amount that fits into their lifestyle and budget. On the other hand, many young homeowners who are looking to purchase their first home, this uptick in the market has become a concern for them and in some cases they are getting displaced from their ideal price range or affordability.
Story of a Young Couple
In a recent experience, I was dealing with a local couple who had their budget set to a maximum of $1.1 million for a detached home with a basement suite to serve as a mortgage helper. In early December 2020 they started their home search with pure excitement as they had saved up for a solid 20% down payment (approx. $220k). This was all a result of great discipline and sacrifice to build their savings in order to get ready for their first home purchase. Well since then, the home sales market picked up steam and the same calibre of homes they desired increased in asking price and were quite commonly being sold over asking price. The very similar home that was $1.1m became almost $1.4m (Surrey/Langley areas) which meant their down payment was not equal to 20% anymore but 15.7% and they would need a mortgage solution that would cover the additional $300k for the similar home purchase. This also meant, either their monthly payment would be larger or they would need to get creative to acquire more money from their other savings such as RRSP accounts or to ask for loans from family to ensure a manageable monthly budget once they land their new home. Along the way, they were somewhat deflated and discouraged and started looking for homes that are of an older age, do not offer the same features and in many cases need updates to meet their wants and needs. They eventually discussed the possibility of giving up on the dream of a detached home with a nice backyard and to settle for a townhouse option. This makes me think of how many young, potential homeowners are faced with similar challenges in this wild market.
Canadian Survey Findings
In a recent poll conducted by RBC, some of their findings echoed what our local couple faced. The survey results showed:
62% felt that potential buyers are being priced out of home ownership for the foreseeable future (10 years)
61% believe the home price will continue to increase for the near future
36% of those under the age of 40 believed that they will never own their own home
We are definitely in unprecedented times and a market that not too many would have predicted before the pandemic started. With the highly contested competition, it is even more important than ever to have a robust and smart financing plan in place when you enter the market. I work with many young home buyers and understand the challenges they are faced with but also percentages and amounts required to live happily once the home is purchased. I invite you to connect with me for a complimentary session to explore how a customized buyers plan can turn your dream of home ownership into reality – even in this market!
Best Wishes,
Sukh Sangha