Myths, facts and tips for first-time homebuyers in Ottawa
OTTAWA -- If you are worried you are priced out of the real estate market as a first-time homebuyer, realtor Taylor Bennett is determined to reassure.
"With all the recent activity and changes to the real estate market in the past 24-months, along with the dramatic change to our world caused by the pandemic, it's easy for misinformation and myths to become popular beliefs," explains Bennett.
Bennett says there are many misconceptions about the most expensive purchase you will make.
Myth: "Homes are too expensive, I missed out."
Fact: There are over 300 active residential listings under $450,000.
"The great thing about a city like Ottawa is that despite the recent surge in prices over the last two years, there are still plenty of affordable homes a short 15-20 minute drive from some of our suburbs to the towns on the outskirts of Ottawa," says Bennett.
At the beginning of this week, Bennett said there were 300 active listings for homes under $425,000, or 33 per cent less than the Ottawa average of $639,000.
"While being in Ottawa may be the preferred location for many buyers, with many jobs remaining virtual or offering remote-work options, this widens the search area for many buyers and makes homeownership far more affordable," explains Bennett.
Myth: "I'll wait to save more/pay off debt."
Fact: The average Ottawa home increases by over $41,000 annually.
“Saving money can be difficult, especially for a freshly graduated young professional entering the working world,” acknowledges the realtor.
“The average graduate leaves school with over $35,000 in debt (student loans, car payments, credit card bills, etc...), and the average salary for a 21-25 year old in Ottawa is $61,000.”
Bennett says, "When your debt is over half of your salary, it's only logical to want to make a dent in your debt before committing to a mortgage but owning a home in a stable city like Ottawa can be one of the most effective ways of saving money quickly."
Myth: "My parents did this on their own, I should be able to, too."
Fact: Since 1980, the average Ottawa home has increased by more than 10x, incomes have not.
- 1980: $62,748
- 2021: $639,631
Bennett’s research shows many Baby Boomers bought their first home in the 1980s when the average car was $5,500, the average income was $11,000.
"The world was VERY different back then." (He jokes that he doesn’t just mean hairstyles--as perms were all the rage.)
"It's human nature to want to compare yourself to your parents, the simple fact is that too much has changed. For many of my young clients, there is strong resistance to asking for or accepting help from their parents once they have left their family home," says the millennial realtor.
"Part of becoming an adult is becoming financially independent and asking mom and dad for help can feel like taking a step back," says Bennett, adding his advice to young first-time buyers is not to look at this as "parental control" but instead as a "business partnership".
He suggests many Baby Boomers are looking for investment opportunities to aid in their retirement, so structuring a mutually beneficial deal, or partnership with parents and kids can help both parties.
Myth: "I want to wait until I find my dream home."
Fact: Your first home won't be your "forever home".
“It used to be common for people to buy one home and reside in it for 30 plus years while raising their families, but today on average people change homes every 5-7 years," says Bennett.
"'Dream homes' today come at 'dream prices' and are simply too expensive for most first-time homebuyer budgets. While it's great to aspire to have a 'dream home', the reality is that most people have to move up the property ladder 4-6 times before they are in a position to buy their dream home."
Myth: "I should only buy if my mortgage payment is less than my rent."
Fact: Homeownership isn't only about monthly payments, it's about building long-term wealth.
In the goal of long-term wealth building, Bennett says, "When calculating the monthly costs of homeownership (mortgage, utilities, insurance, etc...) is common for those monthly costs to exceed what someone may be paying in rent. While renting is easier (less responsibility, fewer taxes, fewer headaches, etc...), 100 per cent of each rent payment goes towards paying some else's mortgage and helping someone else build their wealth."
"A monthly mortgage payment helps pay down the principal of your mortgage, plus the home itself is increasing in value - both of these contribute to increasing your home equity and helps build your wealth," Bennett says.
He add that homeownership brings with it some tax benefits (capital gains, tax implications, etc...) and opportunities to reap the rewards of any home improvements.