A recent survey reveals a significant percentage of recent and would-be homebuyers believe it’s an opportune time to enter the housing market.

More than 40 per cent of recent buyers and over 35 per cent of would-be buyers feel it’s a good time to become a homeowner, according to the Sagen survey. This means that now’s the time for realtors to understand the perspectives and concerns of these first-time clients and prospects.

By delving deeper, industry professionals stand to gain a lot of valuable insights to better serve this large demographic. But, these needs and wants aren’t always obvious. To help, we’ve explored the sentiments of young and first-time homebuyers and shed some light on their experiences, aspirations, challenges, learnings, and tips.

 

How rising home prices impact market entry

 

Katie Smyth and her young family are based on Vancouver Island, B.C., and like many young homebuyers, find it almost impossible to break into the real estate market despite her strong desire to do so. While she appreciates her supportive landlords who live

upstairs and plans to retire, she worries about the uncertainty of their future plans. 

“There’s still that line that we’re walking. We have some savings, but nothing that would ever be remotely enough to put a down payment on anything, so I don’t know what we would do … short of moving in with our families, which is not a situation that anybody wants to be in pushing 40 with a six-year-old kid.”

Smyth’s situation is not uncommon, as the rental market is just as precarious as the real estate market. The financial burden of down payments and escalating prices leave many feeling vulnerable and uncertain about their housing prospects.

 

The struggles of Canada’s rental markets

 

Alex Maxwell, a renter in Toronto, shares the difficulties she faces in the rental market while actively looking for her first home purchase. Escalating rental prices make it challenging for individuals to save for a down payment while enjoying the city’s offerings. 

“For a new rental in Toronto, it’s $3,000 a month. I’m currently paying $2,000. So, you’ve also got the secondary pressure of being stuck in a current rental situation, or it will just be higher to move elsewhere. (Many newcomers) won’t have much wiggle room to live, enjoy the city and also save for that down payment which continues to increase. It’s like a double-edged sword with layers of complexity.”

Maxwell can’t think of a time in the last decade when, financially, she was comfortable enough to purchase something without feeling strapped for cash.

“I’m very thankful — I make good money, and I have a very stable career … and I don’t think I’m extravagant, but the reality is many people can’t lean on parents for a down payment, or they have student debt to get to the career (level) that I’m at.”

But while the Toronto renter has found career success — she emphasizes the need for two incomes to afford a home in the city. 

“This isn’t a purchase I would necessarily make with my significant other at this point. So, if you’re single, buying anything is being pretty much priced out of the market in these cities … for those like me with student loans, it’s just wildly unachievable.

Maxwell adds, “Plus, prices continue to rise much faster than salaries are increasing.”

 

Exploring alternative housing options

 

Even alternative housing options such as condos and townhouses prove to be unaffordable in Toronto. Townhouses can cost close to a million dollars, while even smaller options come with exorbitant price tags. 

Maxwell points out that condos with seemingly reasonable prices often have high maintenance fees that can strain homeowners’ budgets. 

As a renter, it’s a nice-to-have, but as an owner, it scares me because it only takes one issue with the pool or a big reno that has to happen, and my maintenance fees are going through the roof, potentially beyond my level of affordability.”

In light of these challenges, some individuals, like Smyth, are considering the appeal of tiny houses as an affordable housing alternative. 

“A tiny house gives us what we want for our family in an affordable way,” Smyth explains. However, policy and zoning restrictions create barriers to widespread adoption.

“They’re not allowed in some places because a lot isn’t totally understood about what it means (to live in one). It’s still looked upon by many as a transient way of living, for people who are nomadic and want to move their home all the time.”

Smyth believes that the increasing popularity of tiny houses will eventually influence policy changes to accommodate this housing option, though there is still work to be done in educating policymakers about the benefits and dispelling misconceptions about their suitability for permanent residency.

 

Thinking outside the box: Strategies to overcome affordability challenges

 

In particularly expensive markets, aspiring homebuyers often need to employ unconventional strategies to overcome affordability hurdles. While these approaches may not always be successful, remaining open to different possibilities can be beneficial. Some individuals consider incurring additional debt to build credit scores. 

“Our credit is better than it used to be, so at a certain point, there’s a possibility of getting some sort of loan on top of whatever the mortgage would be, or possibly family members could help,” Smyth comments. “But neither of those things is ideal (or) something we would even want to consider … we’re not at that point of need.”

Maxwell has chosen to greatly expand her search parameters to less expensive areas and is even considering country or rural properties. In fact, in late May, she put in an offer on a lake property three and a half hours north of Toronto.

“It’s actually most reasonable right now to look at cottage country and a vacation home or a home in a more affordable area … but at least there’s the opportunity to build equity, to get on the ladder, and just hope and pray that the cottage country boom that’s happened over the last few years continues.”

Of course, this is still hundreds of thousands of dollars for a rural property needing extensive renovations. But, at least, it’s a starting point for some.

Another strategy Maxwell has considered is looking to people within her close groups of friends to explore co-ownership.

“Independently, we (can’t) get a mortgage at this point, or at least not for the full amount, but what if we combined it?”

However, she also points out that options like co-ownership can be pretty daunting if you don’t have the financial acumen to know what you’re getting into. Being able to answer questions like what and how much each party owns is crucial to successful financial planning and well-being down the road.

The reality of market competitiveness

 

Another challenge for first-time buyers — is the immense pressure they face in today’s competitive real estate market. With multiple offers and bidding wars becoming the norm, it can be a daunting uphill battle. 

Unfortunately, a five per cent down payment, once considered significant, is no longer enough to give newcomers a competitive edge. 

Maxwell explains, “When you’re in such a competitive situation, especially with bidding wars, five per cent doesn’t really help because you’re competing with those who already have a property and can leverage the equity they’ve built.”

Smyth highlights the growing disparity between income and home prices and the need for government intervention to address the affordability crisis and level the playing field.

“There needs to be more government intervention,” she says. “I know there’s been some on the rental side of things, but there needs to be more on the real estate side of things, too, because that’s how it becomes impossible for people like us to even get a foot in the door … I’m not a huge proponent of government intervention in our private system but, at the same time, a government is there to keep us safe and healthy — that’s part of their job. And they’re failing on this.”

Smtyh adds, “50 years ago, (home ownership) was expected. You graduate high school, and even if you don’t go to university and you get a basic job, you live in a smaller house, but you’d still be able to buy the house. It was just part of life … now, it’s just spinning wheels.”

Maxwell echoes these concerns and emphasizes the emotional toll of the homebuying process, particularly in highly competitive markets. 

“There’s a certain level of emotional walls you need to build because the chance of getting it is so slim. Whether it’s financing issues or you’re in a bidding war — it’s really difficult for emotionally-led people like myself. I want it; I see the dream … it’s very difficult to compartmentalize that.

“I know people who put in offers on 10 or 20 properties before they got their home, watched them go through that process, and put money down here, there, and everywhere to try and make something happen, only to get declined repeatedly. That’s soul-crushing.”

 

Navigating the journey: Challenges and learning opportunities

 

While escalating prices and intense competition pose significant challenges for aspiring homeowners like Smyth and Maxwell, understanding the financial requirements beyond the down payment, such as closing fees and the accessibility of funds, adds more complexity to the process. 

Maxwell says she was always advised to put her savings for a house in an RRSP — but she doesn’t know if she can access that within 24 hours or needs to depend on a separate savings account. And, she learned you can only use them for certain types of home purchases, meaning the money she’s put aside for a home is now harder to access yet could have been in savings all along.

“There are things to learn about the offers, schedules, and what’s included and excluded. Plus, whether it’s a condo, a waterfront property, or a single-family home in a smaller community, the nuances of the area, property type, and the expectation of what’s included are so radically different. It’s quite a journey from a learning perspective.

“You don’t know what you don’t know, as the saying goes. The good news is you learn as you go, and these experiences will help you better know what to look for when working with realtors in the future.”

 

Prioritizing what matters: Balancing location, space and personal preferences

 

For many homebuyers like Smyth, the location of a property is a top priority. Being close to family is essential, as Smyth wants to avoid the feeling of being separated from loved ones. 

Smyth adds, “It would have to be somewhere that’s close enough to family. There was a time when we all lived so far apart from each other, and I don’t want to go back to that situation.”

Beyond proximity to family, the want-to-be homeowner remains flexible about the type, appearance, and age of the neighbourhood or community, recognizing that adaptability increases her chances of finding a suitable home in a competitive market.

While location remains important to Maxwell, her focus shifts depending on whether she is searching for a primary home in the city or a long-term residence outside the urban environment. As a fully remote employee, having a dedicated office space is crucial for her urban dwelling, along with access to sunlight and ample outdoor space. 

“When you’re living in a concrete jungle, the size of the balcony is so essential. Access to sunlight is huge. There is so little sunlight where I am now, which has an impact on my health,” she explains.

Conversely, Maxwell seeks a place that evokes a sense of contentment when considering a rural property. “It should have something about it that makes me love it. Whether that’s incredible, big windows overlooking rolling fields or a view of the lake, I ask myself if I could look out and be happy every day.”

Compromise: Finding the balance

 

Smyth and Maxwell acknowledge the need for flexibility and compromise in the homebuying process, particularly in today’s market. 

Smyth says, “If you’ve got certain non-negotiables, they’ve got to be major. It can’t be things like the type of flooring or the colours of the walls, or even the number of bedrooms if you’re able to figure out a way to still get what you actually need in the end. Otherwise, in this market, you’re never going to get anywhere.”

While Smyth is willing to compromise on specific features like the number of bedrooms, like Maxwell, a dedicated office space remains a requirement. 

“If I wanted a three-bedroom, it would be because one of those bedrooms would be office space. So, a two-bedroom (could work), as long as I have a dedicated space that may not necessarily be a room, but just private enough to work from.”

Maxwell knows many others who must compromise, too. “A lot of my friends have young kids or are trying for kids, and they’re in this weird spot where they want to be in the city, but the reality is that they’re buying an hour and a half out. I’ve known people that have done that commute every day, and it’s killer — it’s not sustainable or enjoyable, and yet the reality is you kind of have to pick.”

Trusting realtors, leveraging technology and managing expectations

 

Maxwell feels with some faith in the process and a good realtor who can put a different lens on things, you can succeed in a competitive market. When it comes to finding that realtor, she says it’s critical to work with someone you trust. 

While Smyth and her partner are waiting to save more money before engaging a realtor, Maxwell is lucky to be working with someone she trusts.

“Who you’ll gel with is a very personal thing. Ultimately, as you’re in these more competitive situations, your ability to trust that person to represent you as you would represent yourself is the most crucial thing — whoever that is, and however that relationship is built between you,” Maxwell comments.

“The thing that’s great about it is she’s so straight-talking. She’ll tell me, ‘I know you love this place. My comments are this is bad, and I would watch out for this and this,’ or she gives completely unbiased advice from her own perspective or if she were in my shoes. She feels like a balancing point for me … like my trusted advisor.”

In fact, when Maxwell went through the process for her recent offer, her realtor admitted she didn’t know anything about the area and offered to refer her to someone who did — despite having worked on rentals with her for years and, presumably, waiting for a sale transaction.

“That’s the relationship you need. Her goal was to get the best outcome for me, with or without her. And even though I’m working with someone else, she’s been my contact for general questions about anything I might be missing.”

Maxwell feels it’s crucial for your realtor to have some financial knowledge.

“In a time when fees (and expectations) are changing so rapidly, that ability to have a financial lens on things almost makes agents like financial advisors. With the situation we’re in right now, they almost have to have the second layer of financial acumen and knowledge to be able to help buyers through the process.”

Maxwell also leverages her realtor’s network for other professionals she needs to work with. If you already trust them, chances are you can trust their recommendations. 

“Good people find good people, especially those working in this all day, every day. I’m leaning on mortgage advisors and lawyers that have been referred to me. The stronger the network is, the easier or less stressful the experience will be.”

 

Leveraging technology

 

Technology plays a significant role in the home-buying process for both Smyth and Maxwell. Online platforms like Realtor.ca and YouTube provide valuable resources for researching and exploring available properties. 

Smyth particularly highlights the abundance of house tours on YouTube as an invaluable tool for virtual property viewing. Maxwell emphasizes the importance of technology for acting quickly in a highly competitive market, from searching available listings to utilizing online mortgage calculators and digitally signing contracts. 

“I think it’s absolutely essential, and I would not be in the position to make an offer or even think about making an offer without all of those resources,” Maxwell says. 

 

Be prepared and manage expectations

Maxwell acknowledges that the homebuying process can be intimidating and complex, especially for first-time buyers. She believes being well-prepared and working with a realtor who can help manage expectations is crucial. 

“Sadly, you’ll probably have to go through a lot to get to that end goal,” Maxwell cautions. “And you hope you don’t make a rash decision. Especially in a competitive market, you see a place online, you see it in person, and then you’re putting in an offer in a very small window. No thinking time exists in this process right now, in most cases, especially if you’ve got a property that’s selling in just a couple of days.

Maxwell says working with a realtor who has helped manage expectations and prepare for unforeseen challenges has helped ease the anxiety associated with the process.

Despite the difficulties, understanding the perspectives and concerns of young and first-time homebuyers is crucial to better serve this large demographic and provide them with valuable insights.