Be Prepared, Be Realistic, and Don’t Forget To Be Optimistic!
Throughout 2016, first time home buyers had to deal with GTA residents branching out and claiming Niagara communities as their suburbs. While we may not be ready to let go of our small fry status – we may not have a choice!
GO Train expansion plans and residential developments in several communities are making Niagara a desirable destination. Not to mention that a home in Niagara may cost nearly $1 million less than the equivalent home in the GTA.
Our communities have a lot to offer to both native and new Niagara residents. Unfortunately, this real estate trend also offers a host of challenges for Niagara’s first time home buyers.
Availability & Affordability
With fewer homes for sale and an influx of buyers, an extremely competitive market has emerged. In the search for a first home, Niagara residents are struggling with the issue of affordability. For years, Niagara’s real estate market was undervalued. That has changed in the last 2 years, with the average sales price jumping from $272,813 in 2015 to $337,888 in 2017. These prices remain small potatoes for GTA buyers, but may seem like huge vats of boiling oil for Niagara residents. In a region that faces lower average incomes, residents often struggle to save the necessary down payments and secure the proper financing for first time home purchases.
As Garden City Re/Max realtor Jordan Clark surmises, “We are currently experiencing the lowest market inventory we have had in Niagara in 15+ years, mixed with the quickly increasing prices this does not allow for a great deal of selection or time for lengthy consideration. When a buyer does and a house that fits their criteria they have to act diligently and with speed to ensure they can obtain the property. Many listings end up in competition which adds to the difficulty and causes many purchasers to drop their home inspection and financing condition rights as well as put down a hefty offer to ensure they secure what they want, often times even this does not guarantee a successful purchase!”
Adding to the woes of Niagara’s first time home buyers, CMHC introduced new mortgage guidelines for buyers in 2016. For mortgage applicants that cannot afford a 20% (or more) down payment, they must now pass a stress test. They must be able to afford the bank rate of their potential mortgage (around 4.64% now), instead of the promotional rates (around 2.5% now). This means first time home buyer’s purchasing power is reduced. The guidelines were meant to protect buyers from overspending today in case mortgage rates rose in the future. Unfortunately, this means that many first time buyers can’t buy anything until the future when they have bigger down payments.
So with a real estate market akin to vats of bubbling oil, how do Niagara residents wade through the potatoes to find the perfect small fry of their own?
Build up your down payment
I recommend meeting with a financial advisor to create a plan for saving for a home (it may include investments, preauthorized savings withdrawals, fewer trips to Beechwood donuts, etc.) and start saving early in any way you can.
Assess what you want in a new home and what you need. Then balance that against what you can afford. Learn about all of the costs involved (legal, home inspection, down payments, mortgages, maintenance costs, etc), in owning a home, Although you may appreciate a modern kitchen, wouldn’t it be more practical to buy a home with a rental unit in it to help cover your mortgage payments?
Secure financing before viewing homes
Meet with a financial advisor to discuss funding before house hunting. Assess your budget for purchasing and ongoing financing. Then get pre-approved for the mortgage you need to buy the home you want and have your advisor ready to work through the details as soon as you want to make an offer on a home.
Get expert realty advice
Meet with a credible realtor to find the home that is right for you and your budget. Work with an agent who is fast, knowledgeable, hardworking, and able to negotiate with confidence.
Consider shopping with a home inspector
With buyers going into home viewings with cash offers and waived conditions, there is no time to wait for home inspections. Ben Ellens, a Niagara real estate appraiser, advises bringing a home inspector to do a pre-offer walk-through inspection. This helps you shop smart and allows you to act fast when you find a home that works for you.
Above all, remain optimistic and flexible… and try not to get overwhelmed or discouraged.
Realtor Jordan Clark notes that “I find myself more and more acting as a counsellor and life-coach to ensure my buyers are keeping in a positive state of mind so they don’t abandon their search and remain a life- long renter handing over the majority or their hard earned money to some landlord instead of building equity and truly having a place they can call their home.” Homes may be more expensive, and competition may be steep, but we are a resourceful bunch. With the help of a good financial advisor, a dedicated realtor, pre-approved financing, and a dash of planning and patience, the majority of Niagara residents can look forward to owning their first home.