Will Home Ownership be a Pipedream for Gen Z?

There may be no better feeling than closing on your first home.  Over the last 10 years, first time homebuyers have seen the market change dramatically, whether it’s mortgage rule changes that impact qualifying, or rising house prices that took some first timers out of the market altogether. Combine that with stagnant incomes, and it’s not surprising that young people feel that the dream may never happen for them.

But is it still a dream for the younger generation? Last year – 2019 – was the last for millennial graduates. We are now in the Gen Z world.  Gen Z refers those born after 1996, so they’re now 23 and younger. Millennials were born between 1981 and 1996, so they’re now between 23 and 38.
This group grew up with an iPhone in their hand and an iPad on their laps, and clearly have learned to process information differently than generations before them. But what hasn’t changed is their desire for home ownership.

In fact, Gen Z is poised to overtake millennials in their desire for homeownership. A survey  conducted by real-estate company Zillow found that in 15 years Gen-Z homeownership will be bigger than the share of millennials who currently own their homes.

Another survey from Finder.com shows that 81% of the Canada’s Gen Z’ers think they’ll purchase a home in the next 20 years. Ten percent of the 18-24 age group say they already own their own home, while 35% (one in three) believe they’ll purchase a home within the next five years.

Interestingly, millennials are more likely to believe that homeownership is NOT in their future. The difference? It hasn’t been quantified yet, but anecdotally, Gen Z ‘ers don’t like the high cost of renting, and would rather make personal financial sacrifices to save for the large down payment needed.

For these future homeowners, education and information is key. And the best person to help guide the process is a mortgage broker.  The following information is not only for Gen Z, but for everyone looking for their first home.

There are six steps to the mortgage application process.

Step 1 – The Application/Pre-Approval

• It’s important to get all the following information. This allows your mortgage agent to determine the amount you qualify for and the best mortgage strategy/product for you. Current address. If you are less than three years at your current residence, you must provide your previous address as well. In addition, you will need to provide
•  Birthdate
• Contact number
• Do you own or rent your current home?
• If rented, is the rent paid monthly?  If not, specify term of rent
• If owned, is there a mortgage? If so, with whom, the value of your home, and mortgage payments
• Approximate value of assets -- identifiable assets like RRSPs, savings, investments, vehicles, other properties, etc.
• Approximate value of liabilities -- identifiable liabilities like car payments, line of credit, student loans, credit cards, etc.
• Any alimony or support payments
• Employer (if less than three years, previous employer as well)
• Title
• Tenure
• Salary and other compensation
• Self- Employment information that includes historical taxable income, historical gross business income

Step 2 – Qualifying

Your information is sent to a lender for a rate hold, pre-approval or approval.  All info is sent electronically and directly to a lender. A response can come within 24-72 hours.

Step 3 – Verification

Verification will be done on items such as your income, with a job letter and recent pay slip, and proof of down payment. Some lenders require tax returns and Notice of Assessments. Your mortgage agent will list out all the information needed and lead you through a straightforward verification process.

Step 4 – Purchase

Once you’ve found your new home, your Realtor will draw up a Purchase and Sale Agreement, which he or she will also send to your mortgage agent on your behalf. When writing your offer, it’s strongly recommended that a “subject to financing” clause be written in, even if you have a pre-approval. 

Step 5 – Approval

During this stage the lender will review all documents and will call your employer to verify employment. You will also receive a Letter of Commitment with the rate, term, payment amount or frequency, amortization, and more. Your mortgage agent will review the commitment letter in detail with you before you sign.

Step 6 – Funding/Closing

The only thing left to do is to register the transaction legally. This will require a lawyer or a notary, depending on where you live. The lender will forward all the documentation directly to your lawyer, and the lawyer will contact you to arrange a meeting.

During this meeting your lawyer will confirm the details of your transaction and will request a bank draft or certified cheque to cover the amounts outstanding before the closing date, which includes the down payment, the lawyers fee, property transfer tax and any other disbursements not yet paid for, less any deposits already paid.

The lawyer then receives the funds from your lender, disburses them and registers the title in your name – then you get the keys.

Digital Experience 

Gen Z’ers were born to process a massive amount of information 24/7, but info overload can negatively affect anyone. There’s a lot of mixed messages, and sometimes outright misinformation on the ‘Net. Despite the I-Generation “always on” environment, the human touch is still welcome.
Buying your first house is a journey, but don’t take it alone. Contact a mortgage professional to combine your digital experience with the human touch.

Some predictions for the 2020 housing market

We have seen many challenges in the housing market over the past few years. Housing prices have been up and down; housing sales were down but have rallied in many areas of the country in the last half of 2019. The government also introduced the First Time Home Buyer Incentive. Yet, affordability continues to be a hot topic across Canada.

Interest rates inched up slightly for variable rates and lines of credit but on Wednesday, Dec 4, the Bank of Canada left the Prime lending rate at 1.75%.  Growth in Canada did slow in the third quarter of 2019, yet consumer spending expanded moderately, supported by stronger wage growth. Housing investment remained strong throughout the year.

We’ve also seen a slight increase to fixed-rates due to the upward pressure on bond yields and increases to the cost of funds. Still, rates are relatively low – perhaps this is the new normal.  

According to a recent report from RE/MAX, an increase in consumer confidence could be a key factor affecting the housing market in 2020. 

The report found that Canadians have adjusted to the mortgage stress test, which was introduced three years ago, and only two-in-ten Canadians say that the mortgage stress test negatively affected their ability to purchase a home in 2019. 

The report also found and that older millennials are now moving into their peak earning years and will drive the market in 2020. RE/MAX found that more than half (51%) of Canadians are considering buying a property in the next five years, especially those under the age of 45. This is up from 36% at the same time last year.

Here’s a cross-Canada snapshot:

British Columbia

Consumer confidence in early 2019 was shaky -- the number of sales declined by 7% cent. However, confidence is returning and most regions are experiencing a balanced market. The prediction is that BC will continue to strengthen through 2021 and become a powerhouse once again.

Prairies

Alberta’s economy was still sluggish over the year and the unemployment rate is relatively high; however, Calgary is seeing some signs of life as its population grows. According to a national housing market outlook published by the Canada Mortgage and Housing Corp. (CMHC), Calgary is expected to see a return to market growth over the next two years, supported by an increase in the city’s population. This may fuel an increase in housing starts in 2020 and 2021.

In Winnipeg, residential sales were up by 5% over last year. Regina experienced the same increase. Construction starts and house sales are both expected to improve in Saskatchewan in 2020. CMHC predicts that anywhere between 700 to 1,400 new homes will be built in Regina next year and 1,300 to 2,000 new homes built in Saskatoon.

The markets in the Prairies are a mix of buyer's and balanced markets and are expected to stay the course going into 2020.

Ontario

Toronto and the GTA are poised for a strong housing market in 2020. Most other cities in the province are expected to show strong growth as well, especially Ottawa and Windsor, and it’s predicted sales may rise by about 7%. Overall, it’s a seller’s market.

Quebec

The Quebec housing market is on fire. The market is getting a boost by low interest rates and a vibrant Quebec economy, which supports wage increases and buying power. The challenge is a shortage of inventory, which may be the reason the market is expected to remain strong into 2021. Single-family homes are outshining other types of properties.

Atlantic Canada

Affordability is making this region is attractive to homebuyers, and they’re buying detached, single-family. The region's growing condominium market is being driven by retirees.  Increased consumer confidence is expected to stabilize the region. Halifax and Saint John have seen solid price growth of 6% and 5%, respectively.  Most markets are balanced.

The  Market Overall

The housing market has turned around slightly in the last half of 2019. A Reuters’ poll found that a strong domestic economy, rising immigration and lower mortgage rates have helped the housing market make a comeback in the second half of this year. "It is not just low interest rates that are helping the housing market – the fundamental support is demographic and that is largely from a rapidly growing population driven by international migration," Sal Guatieri, senior economist at BMO said in an interview with Reuters.

What will 2020 bring?

The Canadian Real Estate Association’s (CREA) prediction for 2020 is that housing sales will continue to improve through 2020, albeit slowly. National home sales are forecast to rise by 7.5% to 518,100 units next year. Ontario and Quebec are predicted to see sales rise by about 7% in 2020, while activity in Alberta will recover by about 5% compared to 2019. The number of homes trading hands in other provinces is predicted to edge up or down only marginally.

With all the positives going into 2020, if you’re thinking of buying a new home, renewing a mortgage or refinancing an existing mortgage, or just want an update about your local market, reach out to your TMG mortgage agent.

Home Ownership, yes!

OOPS, what happened? I moved in and I didn’t consider all that needed to get done.

Most homeowners admit to making at least one mistake when they purchased their home, according to a homeownership poll conducted by RBC a few years ago. 

While owning a home is a dream come true for many, it can also be stressful if you find you’ve made an error. 



Below are the top three mistakes the poll found, along with a few more you might want to think about before taking the leap.

1.  Property needed work – a lot of it. Even with a home inspection, new homebuyers may get into a home and find it’s become a money pit. Don’t rush in, sit down and plan.
2. Not having a bigger down payment. Once in a house, many homeowners are overwhelmed with the costs. Once again, don’t rush in, sit down and plan.
3. No Home Inspection. If you skip this step you might find the cost of repairs needed may be astronomical, especially if you purchase an older home. An inspector will look at the overall foundation and structural features of the house, the plumbing system, will look for the presence of mould or pest infestations, check the heating and air conditioning, as well as the electrical system.
4. Not budgeting for the increased costs. When considering the extra costs, remember there are mortgage payments, property taxes, and usually higher utility bills. On top of that you’ll may want to redecorate, perhaps buy new furniture and/or appliances. There may be some landscaping work to be done and you may want to renovate. 
5. Not knowing the closing costs. Closing day is coming and you get the call from the lawyer to come in and sign the papers and, bring a certified cheque or bank draft for X amount of dollars. WHAT? Yes, fees and disbursements. There’s the land transfer fee, the title fee, the lawyer’s fee, etc. Don’t get caught short.
6. Forgetting about future needs. If you’re planning on having kids, you may want to consider the type and size of home you’re purchasing. 
7. Not getting a pre-approved for a mortgage. You won’t know what price range you can afford and what a lender will give you without a pre-approval. It’s easy; it’s free and absolutely necessary. If something turns up that may prevent you from purchasing, a mortgage professional can offer you solutions. 
8. Falling in love with a house. Fall in love with each other but not with a house because you may not listen to some good advice. You will ignore the obvious cracks in the foundation because it has 18ft. ceilings and has that great stone fireplace you’ve always wanted. Beware of buyer’s remorse.
9. Not checking market value of neighbourhood. This can cause some purchasers to pay too much; especially a home that has been upgraded to the max in an area that won’t keep its value – unless you plan to live there the rest of your life.
10. Focusing too much on interest rates. Don’t rush in to a market because the rates are low. And don’t focus on getting the lowest rate. Focus on the mortgage loan that works best for you and your financial situation. 

Having said all that, the most recent RBC poll (April 2019) found that Canadians are confident and know what they want.

• Eight-in-10 Canadians say a home or condominium purchase is still a good investment
• Canadians feel it makes more sense to buy than rent 
• Canadians are well positioned to weather a potential downturn in housing prices or an increase in interest rates 
• Affordability and being in a safe neighbourhood top the list of what Canadians must have, while buying in ‘the right‘ neighbourhood is less of a concern 
• Canadians are most willing to sacrifice the conveniences of being close to a major highway (16%), dining and entertainment (13%), good schools (11%) and public transit (10%).

So, bottom line is: Don’t rush in, sit down and plan. A mortgage professional can help you get that home by walking you through every step of the home buying process, with fewer mistakes, and fewer regrets.