A message for first time home buyers…

It a recent chat with a client, it has become clear that it is getting more and more difficult as time passes for a first time home buyer to find a decent home in Toronto under $550K.  The inventory of new listings is down in comparison to previous years and the prices have been going up as a result of low interest rates and the resulting competition/bidding wars for good homes at this first time buyer price point. First time buyers are ready and willing to buy but will need to compromise on some features to get into the market.

The thing to keep in mind is that it’s a first home.  This isn't the "forever" home.  It is natural for most first time buyers to make an entry level purchase such as a condo or small home to start.  Having said that, it is also natural for first time buyers to have high expectations when first starting to look.  This is when compromises need to be made. Once they see what is available and get educated about the market, it's time to make adjustments to those initial expectations.

Once invested in a first home, as needs change and income grows, it may be time to make a move to a larger home. At this point equity has been building in the first home with the payment of a mortgage ( instead of rent to a landlord ) and capital ( from improvements ) and asset appreciation ( year over year for the last 20+ years residential real estate has been averaging approx 5% per year increase in value).

Most first time buyers who wait to buy the perfect home often get priced out of the market and are never able to catch up.

My personal experience is to start by investing in a home within your budget that has good bones that you can live in, in a good location. You can't change the location but certainly can improve the home over time!

June 2013