TGIF: How to Get Into the Market as a First-Time Buyer
Exploding the urban myth!
We know that we live in the most expensive province in the world with Vancouver at the hub. But is it really true, or an urban myth that our young people can’t afford to live in Vancouver? Many young people can’t today and couldn’t 50 years ago - that’s when suburbs of residential housing on big lots sprung up and young families lived happily in the ‘leave it to Beaver’ neighborhoods with corner stores and shopping malls - never thinking of going downtown very often. Nowadays many of our young professionals have chosen to leave those suburbs to Beaver, sacrifice the detached spacious home for a small condo and live within walking / cycling distance of their workplace. With the building of so many condos in the city, many more of our young people do actually live in Vancouver, exploding that urban myth. Meanwhile the suburbs have moved eastwards making the Valley an affordable option for those who still yearn for the kid friendly backyard and white picket fence or a starter condo home at a much more affordable price. Transit is always an issue, but is catching up and more accessible than in the old days when Vancouver was a small town and the TriCities were in the bush.
Current interest rates are an interesting comparison with the 1980s when they escalated to 22%. So yes - prices have skyrocketed to a level way beyond our expectations, but interest rates have been at all time lows for the past number of years and wages are considerably higher than 30 years ago. Housing still does take a higher percentage of our income, but not to the extent that we have been led to believe. The biggest hurdle first time buyers have to jump is dealing with the new mortgage rules implemented this year by the big banks; saving enough money for a larger downpayment and qualifying at a 2% higher interest rate than the one they will actually be paying.
So... in order to help our buyers, whether first time, move ups or downsizers, we have to be innovative to make this market work for them. The first great realization is that there is now inventory with choices for the buyers, and when they see a home they love and can afford, they have to be ready with written pre-approval in place. An experienced mortgage broker can be worth her weight in gold - steering you to the best interest rates and the most favorable terms. Note that credit unions are not subject to the same approval guidelines implemented by the banks. We can even return to sellers or parents holding mortgages to help the buyers.
Second realization is that there is a distinct possibility that buyers can successfully negotiate on the price! Even the condo market is feeling that. Knowledge is power so awareness of similar past sales and formulating a strategy is essential for a successful buyer - much greater comfort than the past scramble to beat out six other buyers and pay way over list price!
A good way to get into the housing market is to buy with a friend or relative and share the load.
Finally... the move up buyers are in the strongest position than they have been for years. The differential between what they are selling and buying is greatly diminished - specially for the folks moving from a town home to a detached home, or those who have outgrown their present detached home and are searching for a larger one. There is a disconnect between the most popular lower price range and the more expensive homes, which are not achieving sale prices reflective of their size and quality - simply because there are fewer buyers who can afford them.
As the supply increases, so does affordability. If you need some navigation through all of this, please ask. As you can tell, it’s our passion and nothing makes us happier than making you happy - we are your eyes, ears and boots on the ground real estate wise. Keeping you covered whatever the climate is our mission.
Michelle, Scott, Sheila, Ray & Shane - Generations Real Estate Partners.