There’s a Reason Millennials Are Buying Smaller Houses

…And it’s not just the tiny house craze.

Millennials have become a powerful force in the housing market. Although they’re waiting longer to buy a house in general, younger millennials are now stepping into the ring to buy their first home, and many of their older peers have already purchased and sold a home once.

But millennial home buyers, who make up 34% of the market, are different from their predecessors in some important ways. For one, only 11% of millennials think they’ll stay put in the house they buy. They’re content to live in the suburbs (despite popular misconceptions), but favour walk-able neighbourhoods and modern amenities like smart tech. And real estate is more than ever a family affair, with many first-time home buyers (66% of which are millennials) are recruiting help from their parents as they step into the world of home ownership.

One of the biggest differences between millennials and previous generations is that they think small when it comes to real estate. Gone are the days when square footage was king – millennials are increasingly gravitating towards condos, townhouses, and small homes on modest lots.

Why Small Homes Are Big With Millennials

There’s a reason millennials think less and more – and, no, it’s not all about the tiny house trend. It’s a matter of practicality.

You don’t have to be a demographer to know the average family unit has changed a great deal over the last hundred years. Gone are the days when families boasted five or more children; for the latter half of the 20th century, 2.5 kids was the norm in Canada.

This trend has continued, and today, more and more families are choosing to have a single child – or none at all.

A three-person family doesn’t need a four-bedroom house. Millennials are instead opting to fit their exclusive brood into smaller, two-bedroom houses and condos.

It used to be that more square footage was better – after all, the space would appreciate in value, and a bigger home would net bigger returns on resale. But with the housing market more expensive than ever, and first-time buyers contending with student loans and other debts, going big is hardly an option.

However, the real estate market has been slow to catch up with this trend. In 2016, 90% of newly-built single-family homes still had three or more bedrooms.

Taking that into account, it’s no surprise home ownership is at an all-time low. Only 62% of Americans owned a home in 2017 (coinciding with the lowest recorded fertility rate in that country).

While both numbers have climbed a bit since last year’s drop, they aren’t likely to return to old norms.

Another trend on the heels of this is the aging population of baby boomers, who are already beginning to downsize to smaller abodes in retirement. The demand for smaller homes is only going to go up.

Together, these trends will likely have a long-term impact on the housing market. There’s a shortage of affordable, smaller homes on the market, and a slew of millennials lining up to buy them.

So don’t discount the value of that tiny lot in the suburbs – it could be worth more than its square footage lets on.

 

 

Why Bungalows are a Good Investment in Canada

They just don’t build them like they used to.

I’m talking about bungalows. Between the 1950s and 70s, these single-story abodes were one of the most popular new styles of housing in Canada. Many older neighbourhoods are exclusively populated by large lots with modest-sized, rectangular bungalows.

However, these houses have lost favour with modern builders. These days, it’s all about square footage, and building lots keep getting smaller and smaller. The present-day equivalent to those old 60s-era neighbourhoods are instead lined with rows of identical two-story townhouses.

But bungalows are still around, and they’re quietly growing in value. If you look past the dated style, there are major benefits to owning a bungalow in Canada today.

Canada’s Aging Population

Canada’s population is aging rapidly, and the way things are going, there won’t be enough senior housing to accommodate the growing demand. That means more and more elderly adults will be downsizing and moving in with their younger family members rather than moving into a retirement home.

For families living with seniors, bungalows are a very appealing housing option. Since everything is on one floor, and there are no stairs to navigate (aside from the basement), bungalows are much safer and more convenient for people with reduced mobility. Everyone in the family can comfortably access the entire living area.

Bungalows are also great for seniors who want to downsize and live independently. The house is much easier to clean than and maintain than a two-story home. There’s no lugging the vacuum up and down the stairs, and less square footage to maintain overall. Cleaning the windows and gutters is far less hazardous on a bungalow.

Homes with two stories are appealing to young families, but Canada’s population is headed in the opposite direction. Families are getting smaller, and many couples are opting against having kids at all. As current trends continue, bungalows are likely to become a highly desired commodity in the housing market.

Easy Renovation

Canadians are hardcore house flippers. Brand-new houses are flying off the market, but so are older homes in need of repair. For those with the time, money and expertise to get it done, renovating homes for resale is a lucrative business.

Bungalows are a renovator’s dream. The layout and construction means they’re easier to alter than two-story homes. Since they’re usually situated on bigger lots, you can add extensions and outbuildings like garages. Converting a bungalow into an open-concept home is also far less troublesome than it is with a second-story floating overhead.

Save on Heating and Cooling

Heating and cooling are major expenses in Canada, and the cost of electricity is higher than ever. Bungalows cost less to keep warm in the winter and cool off in the summer. It’s much easier to maintain a consistent temperature in a single-story house, with the insulated attic right overhead and fewer walls to seal and insulate.

Want to Buy a Home? Avoid Doing These Five Things

Buying a home
You’ll want to avoid these things in the weeks and months before buying a home.

Real estate is complicated. If you rush into the market without doing your research, you’re bound to pay too much, ask too little, or end up buying a crack house.

Okay, scratch that last part. Now that everyone on the planet has read the crack house couple’s harrowing tale, we’re all well aware of that particular pitfall. Point is, there’s a lot you should know before you buy.

There are entire books dedicated to things you should do before buying a home. If you’re in the market, you’ve probably read some already. Instead, we’re going to outline five things you must avoid before making your big purchase.

1. Changing Jobs

You would think lenders would be glad you’re moving up in the world, right? Even if your new job gets you a big raise, it could also delay your settlement by a few weeks. Your creditors will want to see proof of employment, including pay stubs, to prove your income at your new job.

Remember: lenders love stability. Changing jobs might be the best decision for your career, but if it can wait until after your move, you’re better to postpone it.

2. Co-signing a loan

Creditors don’t like it when you’re on the hook for someone else’s debts, even if you’re sure the other person on the loan is financially stable.

3. Getting a New Credit Card

Don’t celebrate your upcoming move with a shiny new credit card. Lenders are going to take a close look at your credit score, and applying for a new line of credit tends to lower it by a few points. You want your credit profile to be as consistent as possible in the weeks and months ahead of buying a home.

4. Skipping the bill

Skipping a payment or paying it late will have a negative impact on your credit score. Make your payments on-time and in-full in the months before you purchase a home.

5. Making large purchases

This could cause a problem in a few ways. To start, you’ll want to keep as much cash on hand as possible for your down payment and closing costs. Your creditor may balk if they notice a discrepancy in your cash reserves from one period of the next.

Big purchases, like a new car, also raise your debt-to-income ratio. You want to avoid increasing your debts if you’re thinking of buying a home. If you take on more debt, you could risk going over the max debt-to-income ratio.

The Surprising Truth About Millennial Home Buyers

Millennial home buyers
Believe it or not, millennial home buyers take after their grandparents.

Who’s buying homes these days? According to a study by Zillow Group, it’s mostly millennials.

Stats on Millennial Home Buyers

In 2016, 42% of home buyers in the United States were part of Generation Y, also known as the millennial generation. Most of them were newcomers to the housing market. The median age of a first-time home buyer is now 33 years old.

What may surprise you is the choices these buyers are making when it comes to buying a home. There is much ado in the media about millennial spending habits, and not a week goes by without a clickbait-y news story about some wild millennial fad (most recently, it was avocado toast). Unfortunately, this has created a widespread a perception that people aged 18 to 34 are bad with money.

Are Millennial Home Buyers Irresponsible?

So is this generation as careless when it comes to buying a house? Not so, according to Zillow. Truth is, millennial home buyers take after their grandparents.

Zillow studied millennial home buying trends and found that this generation shares many preferences with their grandparents’ generation. Their choices set them apart from their parents’ generation (the baby boomers) and the now middle-aged Generation X.

Here are some stereotype-busting truths about millennial home buyers:

  • Contrary to the popular image of millennials as city-dwelling hipsters, almost 50% of millennial homeowners live in the suburbs. Only 33% live in urban areas. 20% live in a rural area.
  • Commitment issues is another trait of the stereotypical millennial. This generation is often seen as one that is willing to lay down roots. But the study showed that 64% of millennial home buyers chose to buy in the same city they already lived in. Of those two didn’t, just 7% left their home state.
  • Critics of the millennial generation like to claim that this cohort craves instant gratification. You would think, then, that this generation is eager to run out and buy the first home they can afford. In truth, millennial home buyers skip the traditional starter home and wait to invest in larger properties with higher prices. The median size of a millennial home is 1,800 square feet, similar in size to what older generations buy.
  • Finally, millennials are often portrayed as being self-centred, preferring to text their friends instead of talking with neighbours in the check-out line. But like their grandparents’ generation, millennials are opting for homes with shared community amenities. They are also more open to choosing townhouses over detached homes than baby boomers or Generation X.

No generation is perfect. We’re not saying that millennials make better or worse choices than their parents did when it comes to buying a home. But it’s interesting to note how their habits differ, and it’s fair to say the current crop of home buyers is far from the fair weather purchasers the media tends to portray.

What is a Net-Zero Home?

We’d all like to live a little greener. And why not? Not only is an energy-efficient home better for the environment, it’ll cuts your utility costs as well.

Most of us have bought into a few energy-saving measures here and there: a new water heater, an energy-efficient appliance, or some LED light bulbs. But we aren’t all ready to embrace an eco-friendly lifestyle wholeheartedly.

After all, smart technology is expensive. Composting is a mess. And no one likes cold showers.

What if living green was easy? That’s the future promised by net-zero homes. The popularity of these homes is set to grow in the coming years, and they could be coming to a neighbourhood near you.

What is a Net-Zero Home?

A net-zero home is one that produces at least as much energy as it consumes each year. The home does this by producing clean energy via solar panels and other means, and by reducing its energy consumption as much as possible.

In the end, the home offsets it energy costs to the point that its energy consumption is nil — hence the term net-zero.

If you’ve never seen a net-zero home before, you might be picturing a tiny house in the woods or a Hobbit-like hippy hovel. Don’t get the wrong idea. Net-zero living doesn’t necessarily mean off-the-grid, or even living off-the-suburb. Many net-zero homes appear identical to typical homes inside and out. The difference is in the details.

Net-zero homes are built from the ground up with energy efficiency in mind. To start, the builder orients the home so that the triple-pane windows take full advantage of the sun’s light and heat. The house incorporates roof overhangs, good ventilation, and natural vegetation to prevent overheating and reduce the need for air conditioning. The walls are as airtight and packed with insulation to keep cool air in during the summer and out in the winter. The roofs are adorned with solar panels that soak up the sun’s rays.

Inside a net-zero home, you’ll find high efficiency appliances and LED lighting fixtures. The surrounding walls, with their tight construction and heavy insulation, make for a comfortable and quiet environment indoors. Net-zero homes also have great natural lighting.

Why Net-Zero Could Be the Future

Sure, you might be thinking, consuming less energy helps Mother Earth. But what’s in it for me?

Well, just take a look at your energy bill. The appeal of a net-zero home goes beyond green living and environmental protection. The year-to-year energy bill savings significantly offset the upfront costs of choosing a net-zero home over a traditional one.

More home builders are catching onto the net-zero trend. In 2013, Natural Resources Canada funded a project to build 26 net-zero homes across Canada. The project showed that these comes can be built cost-effectively in today’s construction environment.

Additionally, Ontario’s new climate plan, set to launch in 2019, will require an energy audit for any new or existing single-family home that goes on the market. The results of the audit will be included in all real-estate listings. This will give net-zero homes an advantage in the housing market.

3 Tough Questions for First Time Home Buyers

Just about every Canadian shares the dream of owning a home. And with interest rates low and house prices climbing ever higher in the GTA, many people feel pressured to jump into the housing market before it dries up.

first time home buyer
First time home buyers: don’t jump in until you’ve answered these questions.

Right now, real estate is undoubtedly a seller’s game. Between the dwindling home supply, soaring prices, bidding wars, and legislative changes, it’s tougher than ever for Canadian first time home buyers to enter this crowded market.

Many first time buyers in Canada are so busy wondering how they can buy in that they forget to ask themselves an even more important question: should I enter the market in the first place?

Before they phone the local realtor or hop on MLS, first time home buyers must ask themselves these three critical questions.

Can I Really Afford it?

This is the heart of the matter. Long-time renters relish the thought of putting their monthly cheques towards equity rather than the black hole of rent payments. But it’s never that simple.

Buying a home is not just a big down payment and a monthly mortgage. First time buyers are often shocked at the extra ‘hidden’ costs of home ownership. This includes closing costs (legal fees, sales tax, land transfer tax, etc.), property tax, monthly utility bills, home maintenance…

In short, it adds up quickly.

Don’t just speculate on these costs. Compare them to your current expenses as a renter and ask yourself: can I really afford to make the leap right now?

Can I Make the Down Payment?

What’s the lowest bar you need to pass to enter the market? Under Canadian law, home buyers must put down at least 5% of the purchase price on a down payment for a home valued at $500,000 or less. For homes above $500,000, the minimum is 5% for the first $500,000 and 10% for the remainder.

If you can’t make that payment, you can’t afford the house. You may have to adjust your spending, make a long-term savings plan, or borrow from your relatives. Regardless, it’s will take time.

Consider this an opportunity to think and re-think your decision to buy a home.

Does Buying a Home Make Sense for Me?

Your parents own a home. Some of your friends are settling down as well. Why shouldn’t you do the same?

Because for most people, a home is the single largest and most important purchase they will ever make. You have to make sure the time is right.

It’s not just a purchase. It’s a life event. Buying a home will impact the decisions you make in terms of family and career as well.

Do you plan on sticking with your current job? Could opportunities home up in a different city, or even a different province or country? Is there a chance you could get married in the next few years? Where does your partner want to live?

Moving is expensive, and there’s no way of knowing for sure what the housing market will look like down the line. Sellers are celebrating now, but that might not be the case in five, or two, or even a year from now. Make sure you’re ready to lay down roots before anchoring yourself to a home.

Here’s the Good News

You’ve made big decisions before. You’ve put thought into your education, your family life, and your career. You know how to sit down, take notes, do research and really think.

Do this you will make the right choice.

The housing market ebbs and flows, but it’ll always be there. Just because you don’t buy into the housing market today doesn’t mean you never will. Making a measured decision to delay your home purchase is more likely to pay off than thoughtless push to enter a tumultuous market today.