GTA Millennial Homebuyers And Challenges They Face
Some would say that millennials are a generation of renters rather than buyers, but that is not entirely true since the majority of millennials still hopes to buy a home, sooner or later. The current market conditions make the way to homeownership very challenging. As opposed to their parents back then, many millennials feel overwhelmed by the high prices and low inventories, so they postpone their homeownership for a later time, trying to come up with the money first. While the baby boomers were fond of white picket fences and big yards in the suburbs, millennials have a different version of the perfect home. Some stay true to the suburban lifestyle because of more living space and better prices. Still, the majority doesn’t mind trading the area for a smaller apartment if it means living in a top location where the restaurants, shops, parks and other amenities are within walking distance. The luxury of having everything available around the corner ranks high on the wish list of millennials, but the way to homeownership can be very challenging for today’s generations and here is why.
Their Borrowing Power Was Cut
The new mortgage stress test may have brought to a market slowdown and higher inventory levels, but that’s because buyers are holding back. The truth is that buyers feel marginalized and priced out of the market, especially since their purchasing power has been cut by ca. 16%, which is around $40,000 per person. This means that qualifying for a mortgage won’t bring in as much money as it would have last year, but millennials are not giving up, and they’re doing the best they can.
Saving For The Down Payment Is A Hurdle On Its Own
Even if homebuyers can provide as little as 5% for the down payment, many are trying to come up with more (at least 10%) to get better interest rates and look better in the eyes of the lender. In cities like Toronto, a 20% down payment can quickly climb to $150,000, which is a lot of money to provide in cash. That’s why homebuyers have become very creative in ensuring a down payment. Some of them live with their parents to save on rent, while others apply for different mortgage programs, such as allowing them to borrow up to $15,000 from their RRSP to pay the down payment. Some millennials even team up with friends to afford a home, given that pooling their incomes makes them a stronger candidate in the market.
All-Time High Prices
When millennial homebuyers finally have enough for a down payment and are granted a mortgage pre-approval, they often are disappointed with how little home they can afford in Toronto. With a median salary of $38,148, most peak millennials can only afford a home worth ca. $203,250, which is a too modest amount for Toronto. That’s why many millennial homebuyers join forces with their partner or wait until they are married to enter the market as a buyer with a double household income. Even then, the vast majority opts to move to the suburbs and in adjacent towns where they can get more square feet for the money they have.
Call me for more details if you are looking for a GTA home and face all the problems above. We can work on finding the perfect solution for you.