Real Estate is always a great conversation starter.
Earlier this year we did a blog on the statistics of first time home buyers and the challenges that come with being a first time home buyer. Today we are going to discuss the reasons why getting into the market is still a great idea and although being a first time home buyer has never been harder, the path to buying real estate is still a rewarding journey.
We understand that in today’s age, lots of young people are wondering if they will even have the opportunity to enter the real estate market. A lot of young people are also wondering if it is even worth entering the real estate market with the way the market has been the past few years. We are here to tell you that it is still a great idea and here is why.
Carlos Miramontez, the Vice President of mortgage lending at Orange County; Credit Union in California recently said that “owning a home is how most Americans build wealth. A portion of every housing payment made by a homeowner is applied toward paying down the home loan balance (principal payment), which increases the equity in the home and helps to build a homeowner’s net worth.”
Canadian households have seen their net worth rise significantly due to the COVID-19 pandemic. If you are a homeowner then your net worth is likely rising 3X more then average just due to the surge in home prices, and 80% of net worth rises in millennial is due to the fact of the rise in the home(s) they own.
We understand that sometimes starting out in real estate is not something you can do right away, and that financial assistance from relatives is not something that everyone can afford. The truth is though, that a financial net worth of greater than enter counterparts is not just because of financial luck passed down from generations. Owners are more likely to be financially smart and focus on important budgeting and cost of living tools for all aspects of their life and not just their home. Even if you can not enter the market for years to come, just working your way towards that goal will lead to increased financial understanding, increased desire to save money for future goals, and an increased awareness of every financial decision made.
As you prepare to start creating financial plans to save for your entrance into the real estate market, understand that it is important to create a goal before entering the market. This is important because you want to have enough money saved for emergencies as well as for some retirement savings and a low debt-to-income ratio on top of a dependable income first. You also will want to plan for the closing costs of buying a home which can range from 2-6% of the purchase price depending on the type of loan, the type of property, the location and other factors.
We know that it is hard to enter the real estate market right now, and we understand it is not always easy to look at silver linings. Financially, saving towards the purchase of a home is a smart tactical decision. Do not feel you need to pressure yourself to this “ideal” of when a home should be purchased, just focus on what is best for your needs and how you can get there in the timeframe that makes sense to you. Understand that someone else’s ideal does not have to be your ideal, and it is best to go at your pace so that you do not fall down a hole because you kept yourself too tight on money for too long.