Millennials are oftentimes viewed as entitled, lazy, the ‘me’ generation. But their reality is much different from previous generations, particularly when it comes to their ability to purchase a home.
In recent years, skyrocketing real estate prices haven’t been matched with skyrocketing incomes for those entering the workforce. Millennials also face more job insecurity and higher debt—especially from higher education—than their parents. Here’s how REALTORS® are helping this generation get their foot into the housing market.
Rochelle Edwards, a sales representative with S. Todd Real Estate Ltd., still classifies as a millennial herself, born in 1985. The focus of her business is millennials, particularly first-time buyers. “They’re the black sheep of real estate,” she says.
According to Edwards, some seasoned real estate professionals avoid millennials, assuming they’ll need too much handholding. But in her experience, “they’re excited and strong,” even if sometimes they have unrealistic expectations that need to be tempered.
But she does find they often come into the process feeling discouraged. “They think they’ll never be able to afford anything and it’s a lost cause before they even start,” she says.
Edwards asks prospective clients if they’re happy with their job (and plan to stay a while) or if they might relocate in a couple of years.
“These are things we try to hone in on from the very beginning, if they’re determined to buy,” says Edwards. In some cases, renting might be a better option—at least for now.
Edwards also looks for locations that would appeal to renters, should the home buyer need to move out (to relocate or for financial reasons).
“I always encourage condos because it’s less money to furnish—those are things first-time home buyers don’t pay attention to,” she says. She also encourages them to purchase a two-bedroom property, since it means an easier resale down the line. And, if a situation arises where they’re feeling financially strained, they could rent out that second bedroom.
Jelani Smith, a real estate salesperson and founder of Bay Street Blog—a millennial finance platform—believes there’s a lack of financial literacy among his generation, and his goal is to improve that.
“When it comes to real estate, a lot of millennials seem to not understand you need to start small—not everyone needs a four-bedroom, two-garage home, especially if you can’t afford it,” says Smith.
He tells prospective clients to start small with a condo or townhouse, and then upsize over the years. “That’s the best way to get to that end point rather than stressing out your finances and living paycheque to paycheque,” he says.
Smith has been through this himself. To save money for a down payment, he lived with his parents while working two jobs. This allowed him to purchase a townhouse in Scarborough, Ontario near the highway and two GO Transit stations—ideally situated to commute into Toronto. At the age of 22, he became a homeowner.
Some millennials have the mistaken belief moving out to the suburbs is a less expensive option, but that’s often no longer the case. “If you’re taking the GO train from Oshawa [Ontario to Toronto for work], you’re saving on the purchase price, but you’re spending more money on transportation and property taxes,” says Smith. “A lot of people don’t take that into consideration.”
When Smith was house hunting, he came across a detached house in Brampton for the same price and same square footage as his townhouse in Scarborough. But through a bit of research, he discovered the property taxes and commuting costs would have been significantly higher.
Preconstruction is another consideration. Home buyers may have to wait two or three years before they can move into their condo or townhouse, but for millennials it’s an ideal way to save for a down payment—while locking down today’s prices.
This is one of the best ways for millennials to get a foot in the market, says Maurice Anderson, a Royal LePage sales representative, who focuses on the millennial market. “You have staggered payments, and once it’s built you already have an increase in equity.”
“The biggest challenge I’m seeing is it’s hard for (millennials) to save up for a down payment,” says Anderson. “It’s hard to get a mortgage with 5% (down). Usually I recommend having 10% down at a minimum.”
He also recommends clients think outside the box. If a sibling is also looking to buy, they could consider looking for a triplex property, so each sibling owns a floor of the property, and they could rent out the basement as an investment property.
Edwards also suggests younger clients consider alternatives.
“We talk about the property ladder,” says Edwards. “Start with something smaller—it’s probably not going to be Instagram-worthy. Stop comparing your home to the HGTV homes you’re watching on TV.”
Over time, millennials can maximize their resale and work that ladder. “The biggest hurdle is setting expectations,” says Edwards. “If a bungalow works as a first step on the ladder, then make it work.”
Do you have tips to help millennials enter the real estate market? Tell us in the Comment section below.