You may or may not have noticed, however as of late, the Canadian Housing Market has been booming. While this probably sounds like a great turn of events for many home sellers – what about the individuals who are first time home buyers and are trying to take that first step onto the property ladder. Do these young home buyers stand a chance with the rising house prices??
With high levels of debt, such as student loans and not having had the same length of time to work towards growing their income, this current reality can also be an especially difficult time for young home buyers. However, the Bank of Canada is lowering interest rates – so are there opportunities for young buyers?
As probably already know, having bad credit can make it even more challenging to secure a loan, especially one that is large enough to purchase a home. That being said, if first time home buyers in their 20s or 30s for example, are having to secure a large mortgage to purchase their new home – what hope will they have of a positive outcome? Well here is what some of the financial experts have to say on this matter.
The overall status of the current housing market in Canada .. .
First of all, there are two opposing views on this topic. On one side, we have housing market experts detailing how the high cost of homes is sure to fall in the near future – and not even fall – crash, actually.
On the other hand, other experts state that the market is doing fine and will continue to be strong – especially with the low interest rates that then can even foresee continuing to drop further.
While the first side of the debate may perceive the interest rate as a negative sign of what’s to come with the housing market – not to mention that the homes are currently way overvalued, the latter believes that the interest rate is a good indication that the economy is improving, with employment rates lending themselves to home owner’s being able to keep up with their mortgage payments as a result.
Whether or not you side with one of these views or not – one thing is for sure, these high valued homes make it extremely foreboding for young home buyers, as they wonder whether or not they can successfully enter the property market. This is especially true for home owners looking to reside in cities like Toronto and Vancouver where prices of homes continue to soar.
With jobs and other lifestyle considerations in these cities being a big draw for many young buyers – the extreme price of homes in these areas might just mean that living outside of the city and commuting may be a more feasible alternative -albeit, not what where they really want to be.
Low interest rates and the housing market . . .
The reality of it is that it doesn’t really appear that income levels are increasing rapidly enough to keep up with these prices, even for current home owners. Instead, it would seem that low-interest loans are a more likely response to dealing with these demanding prices. While the lower interest rate, on one hand tells buyers “ be cautious, don’t take on more credit, pay down your current debt” – the other hand is more encouraging when it comes to applying for more credit, saying “ buy now, before interest rates stood back up”. As you can see, this can be somewhat confusing for all in involved – and the lower interest rate may also have some specific implications for potential first time home buyers.
As mentioned, Toronto and Vancouver currently represent the leading real estate markets in the country. As a result, many experts believe that the recent interest rate drop will only add more fuel to these markets – and ensure prices continue to grow.
While low interest rates are enough to cause any home buyer to go into a panic in order to make sure they purchase their new home while the rates are lower – this line of thinking may hold even more weight for first time home buyers. If they see this as their only chance to buy a home, this may lead them to rush into a purchase – believing that they can save a lot of money in the process.
However, when it comes right down to it – the amount that they will save is still likely to be rather minimal in the larger scheme of things. In fact, their mortgages – if they can even obtain them will be still be high – maybe even making monthly payments burdensome, despite the lower interest rates. Again, reinforced by the sky-high record breaking home prices in major cities like Toronto and Vancouver – first time home buyers may find themselves extremely discouraged.
Going back to the original question – it does seem like these rising prices are pushing many young buyers clear out of the market. With the price of an average home being valued multiple times above the average income level right now- the Canada housing market seems as if it is an exclusive club that only the wealthy and more financially stable families and individuals could hope to join. Time will tell, I guess if home ownership will become more of an obtainable goal for young people – for now however, it doesn’t appear to be all that welcoming.
