Home ownership among Millennials sits at record lows at this time, and there’s a good reason for that. Strapped by student loans and facing mediocre wage growth, many people who in earlier generations would be first-time home buyers are now putting off home ownership until they feel more financially stable.
There’s nothing wrong with that; however, what isn’t fine is thinking that buying a home shouldn’t be on your radar once you do achieve a semblance of financial independence. No other financial decision can stabilize your credit and your lifestyle quite like home ownership can. You are also not setting your living situation in stone — you can decide to sell after five years, or after enough time to build up positive equity, and you can always rent out your humble abode rather than selling it.
So, can buying a home be a smart move for your pocketbook? It depends. Here are four real estate experts’ opinions on the matter.
Buy Now, Grow Later
One of the biggest incentives people have to buy now, according to real estate agent Carl Bretzlaff, lies in the possibility for future growth. Bretzlaff lives with his family near Edmonton but often tries to help newcomers to the area find a great place on the outskirts of the city in a quieter, and more importantly, cheaper neighborhoods.
“If you look near the city, even many typical-looking three bedroom homes can be priced close to seven figures,” says the owner of Stalbertrealestatepro. “But, if you look just 20 or so minutes outside the city in Edmonton, you have great houses, many of them new, going for prices that would have looked tempting even in the late 90s.”
Bretzlaff points to a particular listing for a four-bedroom home just under $500,000. “At that price, you are spending far less on a mortgage for more house than paying for a detached property inside the city.”
He suggests that people who are beginning to pay off their debts look for listings like these so that they are building equity in their early 30s rather than paying rent. And, since St. Albert is a high growth area, they can “benefit from parking their money for five or so years as the market goes up.”
Avoiding Tyranny Against Tenants
According to Yaletowncondopro site owner Andrew Szalontai, owning his first home meant a tremendous sigh of relief. He says that past experiences with landlords made him realize how much power property owners wield, especially in high-value markets.
“Oh, he was terrible,” Szalontai says with a laugh. “I’m not naming names, but didn’t put a dime we gave him back into that shoddy house.”
He says that his personal philosophy is that a homeowner will always take better care of the property they live in because they see how issues affect them every day. They can also invest in their own property and see dividends in the future.
One vivid incident recalls him begging for a new kitchen sink fixture because the old one “made doing dishes next to impossible.” He eventually decided to take matters into his own hands and buy a replacement faucet himself.
“I knew I wouldn’t get that money back,” confesses Szalontai, “but it was worth just feeling like I could improve my own living situation.” Now, as a homeowner, he can make changes to his home that adds to its value, putting money back into his pocket later on.
Add Income Streams
One unique aspect of owning a home, says Marc Brennan of Portcoquitlamrealestatepro, lies in the fact that it can help you turn a profit quicker and more reliably than many other types of assets through renting.
He says he often finds himself agreeing that people should start saving for retirement by their late 20s, but not to the extent that they trade off opportunities to own real assets. Everyone should have an IRA of their own and something like a 401k from their company, he concurs, “but there are people out there who think you should start an index fund and rent your house and your car in the meantime.”
He says that while such investments do offer higher rates of returns than typical home value growth, they don’t provide nearly the amount of utility that four walls and a roof can. “You can’t rent out your index fund to some other family,” he quips.
Part of the reason for his enthusiasm for home ownership lies in his area’s anticipated high growth rate. Once a new commuter rail opens up in Port Coquitlam, he predicts that new people will want to consider renting out there rather than in the city.
“That will be a gold mine to any property owners who are willing to open their home to renters,” he assures, adding that tax incentives and low mortgage rates can make getting your foot in the door easier for property investors.
Don’t Overdo Your Debt
While all of these real estate agents are enthusiastic about what home ownership can offer, Eric Lin of Richmondcondoshomes is quick to temper that zeal with some sober realities.
He says that home ownership is often a symptom of financial stability rather than an immediate source for it. Those who “jump in it too quickly” risk complicating their futures rather than securing it.
Lin tells his children and many of their friends: “Get your debt payments in line first.” He suggests prospective home buyers to have all of their expenses controlled and their income steady. Lin also cautions against betting on future growth or even continued income because “who knows what the next month will bring?”
Ideally, once young people get steady income, he says they will not have to worry as much about finding the money to pay down their debts or cover bills. Then, they can start saving while seeking to improve their lives by investing in their health or a more reliable and efficient car.
“Only when they have taken care of themselves and have enough savings to weather any sort of financial storm,” can they realistically start saving up for a down payment, he suggests.
Buying a Home Can Be Great for Healthy Pocketbooks, Bad for Leaky Ones
In the end, those just now entering the career phase of their adult lives should put home ownership on their radars if the opportunities are there. Doing so can be a great growth strategy, a way to control your own environment and an opportunity for extra income.
However, as Eric Lin points out, these opportunities are only available to those who already have a solid financial outlook. While they may get a boost from homeownership, especially with help from people like parents, it will not make their financial troubles go away.
So, not selling yourself short financially basically comes down to knowing if you are ready to own a home and then finding the best growth strategy possible through a property investment.
Paying for unexpected expenses during retirement can be difficult, but taking out a reverse mortgage may give you the money you need to get out of debt. Of course, you can also spend reverse loan money on anything else you wish. Therefore, when you are comparing reverse mortgage pros & cons, you should consider the flexibility of this loan type, which also extends to repayment terms. You do not have to pay what you borrow back bit by bit each month as you would with another loan type. However, a negative part of the reverse mortgage process is that you cannot move out of your home or the lender will immediately require you to give them the loan balance. The only other alternative will be to allow your lender to sell your home.