First-time home buyers may have increased their average budget, but a new report indicates that they are also waiting longer to make that first purchase in the wake of increased housing prices.
"High prices in a few major cities, and the fact that prices are outrunning incomes in Toronto, are turning off some first-time buyers, while forcing others to go deeper into debt, tap their parents for hefty down payments, and opt for a condo rather than a detached house," Sal Guatieri, senior economist for BMO Capital Markets said in the bank’s recent home buying report.
The average price first-time buyers expect to pay in Canada went up from $300,000 in 2013’s report to $316,000 this year.
Unsurprisingly, the report also revealed first-time homebuyers in Toronto and Vancouver expect to spend more on their first home than in any other major market; with Torontonians preparing to spend $408,300 and Vancouverites expecting to spend $506,500 on a first home, respectively.
Further, 60 per cent of those polled say they expect to delay purchasing a first home due to ever-increasing prices, though BMO warns that these fence sitters may lose out on a preferable rate.
"In a real estate market such as Canada's, where prices have been consistently rising, those who put off their purchase need to ensure that the rate at which they are saving outpaces price gains,” Laura Parsons, a mortgage expert with BMO said. “Otherwise, they may find themselves further behind in the long run."
This new data arms brokers with information about the always important first-time buyer, allowing them to strategically plan how to best counsel these clients on the home buying process.
"To help ensure first-time buyers don't spend beyond their means, they need to be fully prepared to purchase the right house, at the right price,” Parsons said. “Getting pre-approved gives buyers the opportunity to consider multiple options, during a time-sensitive decision period."