Wednesday, 9 August 2017

Home Ownership Is Not Your Right

Buying a home as a millennial takes work, hard work.

Owning your own home is the dream right? Even with the current bloated house prices and terrifying real estate market 86 percent of millennials still consider home ownership important. The problem? It costs a hell of a lot of money to buy a place. The average house price in Canada is sitting at $504,458 (as of June 2017), so even if you put down the smallest possible down payment, that is still going to be over $25,000. If instead, you want to avoid having to pay additional mortgage insurance to CMHC, you are going to have fork over a 20% down payment, and that will cost you over $100,000. That's a lot of money, and it doesn't even factor in the additional costs associated with your first home. 


And I'm going to go out on a limb and guess that you don't have Rihanna levels of money...you know, since you're reading a personal finance blog and all. 

This is the part where I remind you that buying a home isn't easy, it's a lot of work and requires determination, commitment and cash hoarding. Maybe that's why so many of my generation haven't made that first jump. Of the 63 percent of millennials who want to buy a home within the next five years, 44 percent haven't started saving. I'm going to go out on a limb and say that saving $100,000 (or even $25,000) in less than five years is next to impossible. This is what I mean when I say that home ownership is not your right. 

The real estate market doesn't care if owning your home is part of your big plan or dream life, it only cares that you can show up with dollar bills. 

I don't disagree that buying a home is more challenging today than it was for our parents. The increase in house prices has outpaced the rise in wages over the past 30 years. That's not the only factor though. Lower interest rates in recent years and decreased requirements for minimum down payments give today's buyers an advantage. Buying a home has always been hard, us millennials don't get to claim all the injustice on this one. We can complain and whine all we want, but it's not going to change anything...the only way to check big goals off your list is to work, work, work, work, work (how many Rihanna references do you think I can fit into this post). 

I bought my place seven years ago, and I remember the struggle of saving up enough money. I knew that I wanted to stop paying rent, wanted to be able to paint, and wanted a yard for a dog. I was ready, but my wallet wasn't. That didn't mean it wasn't in the cards, it just meant I had to get serious about saving. If you're in that boat and looking for some advice, I've got a couple of tips for you: 
  • Make a plan! Stick to that plan! Yes, you're going to need to decrease your spending, and it wouldn't hurt to make a little more too. This is how you earn the right to owning a home. 
  • Weigh your desire to buy a home with your current lifestyle to determine what you are willing to sacrifice. It can be worth it to extend your timeline if it means not cutting out all spending that makes you happy. 
  • You will get there when you get there, and the right house will be there when you're ready for it. 
  • Don't start looking at houses until you are ready (aka have the money). 
  • Be VERY firm with your budget and when you do look at houses, don't even consider anything that is over it. 
What's worse than wanting a home? Not wanting a home! 
Obviously, there is still a lot of pressure on millennials to be home owners but there are 504,458 reasons not to give in to that pressure before you are ready. I do not regret buying a home, but I seem to be in the minority on that front...81 percent of millennials who have jumped into the market are now planning to sell their homes and it's overwhelmingly about money:
  • 63 percent say mortgage and housing costs are making them cash poor.
  • 57 percent fret that rising interest rates will make it harder for them to meet their mortgage payments.
  • 36 percent feel that renting is the 'better option.'
Those stats are scary and upsetting. I can't imagine the stress of thinking you found your dream home just to find out that you can't actually afford it and have to deal with selling. Please don't get yourself into that situation. 

I know it might seem like I'm spitting stats at you and trying to quash your dreams of being a home owner but that's not my intention. My intention is to make sure you are ready to take that step and that it is actually what you want. Buying a home does not check off some hypothetical box on your 'adulting' checklist. It doesn't even have to be something you want. I might be in the pro owning a home camp, but it's not for everyone. There are plenty of perks to renting. You don't need to concern yourself with the ups and down of the real estate market, there's stability in your rent payments, it's easier to move, you're not responsible for repairs and maintenance, and it is often cheaper. I have an Aunt and Uncle who have rented for as long as I can remember. They are both comfortably retired and being lifetime renters has not negatively impacted the rest of their finances. 

Whether your goal is to buy a home next year or to continue renting indefinitely, having financial goals to strive for will motivate you and make you work harder. And sometimes, working hard is exactly what us millennials need to do to get those boomers off our backs ;) 

Where do you sit on the home ownership spectrum? Current home owner? Hopeful future home owner? Or satisfied renter? 

Buying a home as a millennial takes work, hard work.

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