Millennials: Planning for Home Ownership in Waterloo Ontario
Millennials who are graduating university, starting careers and managing student debt have a lot to consider when plotting a path to home ownership. Tyler O’Donovan, a local expert on real estate in Waterloo Ontario explains the when, where and how of realizing your dream of owning your own home:
With an ever competitive job market, over inflated housing prices and crushing student debt – the dream of home ownership for a Millennial; an individual born between 1980 and 2000, – could be compared to the fevered visions of a madman.
Canadian newspapers are rife with articles about how unaffordable houses are for young Canadians and that in most major cities; condominiums are the only ‘ownership’ option – but they are not without their own caveats and pitfalls.
Twenty and Thirtysomethings are the new wave of home buyers in Canada – 93 percent of rent-paying Millennials aged 18-34 say they want to own a home sometime in the future. (Source: Trulia) The years between ages 25 and 45 are the peak home buying ages, according to Goldman Sachs, meaning a possible future surge in home sales as Millennials enter the market. However, lower employment levels and smaller incomes have left this age group with less money than previous generations. (Goldman Sachs) This means they are increasingly being priced out of the larger real estate markets such as Toronto, Calgary and Vancouver where the average residential sales prices start at over half a million dollars. (Remax 2015)
In Waterloo Ontario (and it’s sister city Kitchener), a burgeoning tech hub with an established insurance industry and future light rail transit, the costs are considerably less. The average residential sale price in 2014 was $336,900 – much less than the other major markets in Southern Ontario. (Remax 2015) Through its extensive market research on the topic, Goldman Sachs discovered that price is a more important factor for Millennials when buying than it was for previous generations. Given that the region is attracting international known tech giants such as Google who offer well-paying jobs, the Waterloo Ontario real estate market has the potential to be ‘Millennial Driven’ in the next five years.
Before we get too ahead of ourselves, there a few things Millennials should consider before taking the path towards home ownership. Take the time to look at your future priorities – if you are planning to stay in an area less than five years, home ownership might not make sense. However, if you’re starting a family, the opposite is true. Look at the costs of home ownership – mortgage payments (interest and principal) property taxes vs. continuing to rent – as well as your own individual financial situation.
Add up all your debits (money you owe) and credits (money you have in assets) and if you’re like most Millennials your ‘debit’ column is considerably larger. If this is your situation, you must ask how comfortable you are with carrying debt. If you want to pay it off as quickly as possible, do that first before starting home savings. While it is possible to make debt payments and save towards housing– it will be one less payment to worry about in the future.
When you have your financial house in order set a realistic ‘price point’ on the home you want– This means calculate how much you will owe to your home each month; including the mortgage payment, utility bills, property taxes, regular upkeep – basically everything. If your current rent is more than that amount, you’ll likely be just fine. If the amount exceeds your current rent, put the difference away into a savings account for six months to see how comfortable you are with the additional expense. If you are finding that difficult to manage, look for something more affordable or continue to rent until you’re in a more stable financial situation.
A big step for Millennial buyers may be the learning curve that comes with understanding the home-buying process; this includes new financial terms, potential trade-offs and commitments to consider. Credit scores, mortgage down payments, fixed and variable rates and the ‘Federal Home Buyer’s Plan’ are but to name a few. However of all these, saving for a down payment will be key. How much you should put on a down payment depends on your individual situation – if you have as high as 20 percent saved up, you can dodge the high insurance premiums added to mortgages acquired with a lesser amount and you would also save thousands in interest.
Lastly and most importantly – the best decision is an informed one. Whether at your local bank branch or when dealing with realtors and mortgage specialists – make sure you are dealing with someone who is experienced with first time home buyers and is understanding of their concerns. Each perspective homeowner’s situation is different – only a qualified professional will minimize the risk.
Tyler O’Donovan is a high performing realtor for Remax, who believes in taking the time to educate first time home buyers even before they become clients. You can reach Tyler with any questions at firstname.lastname@example.org or call him direct at 519-885-0200.