According to a TD study, first-time homebuyers are spooked by the housing market to the point that 71% of respondents fear being hit with unexpected costs during the home buying process.
Rising prices in conjunction with unpredictability have rendered the housing market more nebulous for millennial-aged buyers than any previous generation. However, the TD report also elucidated the degree to which Canadians are ill-prepared to enter the market.
“It can be surprising how many homebuying expenses there are,” said Marc Kulak, vice president of TD Bank Group. “It’s important to understand all possible costs that could come with purchasing a home so you don’t get hit with expenses you didn’t expect, and it can help you feel more confident knowing what you can comfortably afford.”
The TD results revealed only a third of surveyed Canadians are saving for a down payment, while a meagre 39% are paying down debt. Less than 28% are taking steps to improve their credit scores.
Erica Mary Smith, broker of record and co-founder of Stomp Realty, thinks they should try harder.
“Credit plays an important role when you try to get your mortgage, so they should try to improve their credit for when they try to get their mortgage,” she said.
Smith is also sympathetic to millennials’ plights. For one, it’s unlikely they’ll be able to afford homes as large as the ones they probably grew up in, and she added that, to boot, they’re on the receiving end of a torrent of unfair criticism.
“I find it really hard for millennials to get into the market now,” said Smith. “Pricing is unaffordable and we all either grew up in a nice home or townhome, but when you grow up you went to recreate what you had or more, but now it’s more expensive. I want to say 90% of millennials we deal with have down payments from their parents, otherwise they wouldn’t be able to afford getting into the market.”
Parents gifting money to their adult children is nothing new in markets like Toronto’s, primarily because it’s the only way first-time buyers can get a foot in the door of a home they own.
Smith says millennials are more resourceful than they get credit for.
“Inheritance money is being used now,” said Smith, “but I see millennials buying in areas like Whitby and Ajax now, but they still rent downtown, and if they want to have a family in the next five years they’ll at least be able to use that equity. Maybe they’ll rent it out until they’re ready to make that jump or they’re just waiting to meet someone so that with two incomes they’ll be able to afford something they want.”
Millennials Stare Down Nebula by Neil Sharma | Canadian Real Estate Wealth