If Buying a House is a Financial Stretch, Keep Saving!
The theme in housing market forecasts for 2015 so far is steady pricing. Some markets will more or less be flat, while the Big Three markets could rise 3 to 4 per cent. What more could go wrong if you’re struggling to save enough money to buy a first home?
Potential young homebuyers are facing a tough choice in today's real estate market, buy now despite the Bank of Canada's recent concern regarding real estate overvaluation or wait a couple more years and risk that affordability deteriorates further.
The Bank of Canada's latest report says that the current generation of young people who own a house carry more mortgage debt relative to income than the previous generations did at the same age. Carrying on more debt means these young individuals are more vulnerable. Income shocks are a big deal for young homebuyers. The job market conditions aren't that bad in Canada, but temporary work is becoming increasingly common, thus the constant threat of income shock is ever present without another contract in place when your current one expires.
The risk level for young homeowners is much higher today, and this requires more intense preparation when buying. If you're stretching to afford a home, consider using more time to save a bigger down payment and practice living on a tight budget.