Millennials are now the largest group of home buyers. They have a different wish list than their parents and face different challenges to obtaining the American dream.
Millennials are on the move and fast becoming the largest segment of home buyers, creating major market opportunities for baby boomers downsizing. According to realtor.com’s latest numbers, in November 2017, Millennials (born between 1982 and 2000) made up a 39.6% Share of Mortgage Originations.
Shutterstock: Millennials Like Old Town Alexandria, Virginia Where They Can Walk To All
The median price for mortgage originations in November, 2017 was a median price of $238,000 and an average price of $270,000. That number soars when you look to major metro areas Millennials flock to. Take Boston where according to Zillow the median home value was $561,600 as of November 30, 2017.
Director of Economic Research for realtor.com, Javier Vivas sees the Millennial market share growing. “Many millennials are buying a home for the first time, so there is inherent enthusiasm in how they approach the process. But for many young homebuyers there is also an increased sense of urgency. Life events and market conditions are accelerating their need to enter the market,” Vivas observes. “Millennials are a driving force in today’s housing market. They already dominate lower price home mortgages and are getting close to overtaking older generations for mid- and upper-tier mortgages. In 2018, we expect millennials (buyers aged 18-34) to gain market share – even in the face of challenges.” he adds.
Those challenges include Millennials taking on more debt. According to Vivas, record home price increases in most major cities (where Millennials like to live) is growing faster than income. “We see them being forced to take on more expensive mortgages with the same down payment,” Vivas explains.
Add in that pesky student loan debt and some Millennial couples are facing a harsh reality. Listen to Rick Ross, co-founder of College Financing Group, a national consulting firm specializing in financial aid and student loan repayment counseling . “We are now seeing the direct impact of student loan debt for those in their late 20’s as the major hurdle to buying a home,” says Ross . “Lenders see couples with a $100,000 of combined student debt when qualifying them for a mortgage.”
Koki Adasi, an associate broker at Long & Foster in the Millennial laden Woodley Park area of Northwest Washington DC works with many Millennials. “They want an urban lifestyle with good schools and walkability to restaurants, libraries and parks. Millennial wish lists include; open concept living spaces and home offices. Some in-demand areas include; Arlington Virginia, DC’s Chevy Chase, Old Town Alexandria, Virginia and Bethesda, Maryland.” On any weekend you’ll find these spots loaded with strollers, dogs and Millennial parents. “Because prices are steep, I see more buyers getting assistance with down payments either from their parents or from government and municipal programs,” notes Koki who also points to lenders recently loosening up on down payment requirements which should help Millennials.
Poolside View At CANVAS in Miami
Head south to Miami’s vibrant and developing, Arts & Entertainment District located just north of downtown Miami. Nir Shoshani and partner Ron Gottesmann of NR Investments (NRI) had the vision to transform what was urban blight into an urban village concept. “We wanted to create a different type of urban living and entertainment experience with the Arts & Entertainment District, dedicated to happiness and mindfulness,” Shoshani said.
NRI’s current condominium project, CANVAS ready in early 2018 with 37 floors and 513 units soars above the Arts and Entertainment District. It’s only two blocks from Miami’s free Metromover, a plus for Millennials. With 20 street artists creating murals throughout CANVAS’ public spaces and a state-of-the art fitness centers with training walls designed for couples, CANVAS which is Fannie Mae approved for up to 97% loan amount hits all the sweet spots for Millennial buyers. These include; indoor/outdoor yoga garden, 30,000 square feet of amenities and Children’s Playroom and Lab.
Danielle Coughlin, 32 and fiancé Angelo Lavorgna, 34 recently purchased a 1,544 square foot home in Palm Desert, California after renting a much smaller apartment. They couldn’t be happier with home ownership. “I had been saving and saving for a down payment. Then the right place at the right time at the right price just came along and we jumped on it,” says Coughlin. Competing against higher offers, Coughlin said their 20% down payment helped them land the property. A personal letter to the seller explaining how Coughlin and Lavorgna hoped to raise their family in that house, cinched the deal.
If you’re a baby boomer selling, there’s probably a Millennial buyer just right for your family home.
Source: Forbes.com Ellen Paris , Dec 27, 2017Opinions expressed by Forbes Contributors are their own.
I’m very interested in buying a certain house, but the seller wants me to fork over a really big deposit. If I change my mind, can I get my deposit back?
The short answer to your question is that, in most cases, real estate transaction deposits are not refundable.
There’s no set amount for deposits, however. If the owner’s demand for a large deposit is a major sticking point, you could ask your real estate representative to try to negotiate a lower deposit amount with the seller.
A deposit is the money you put down to secure a property that you want to purchase. Providing a deposit is both a gesture of good faith and a serious commitment. Once the seller accepts your written offer, it becomes an Agreement of Purchase and Sale (APS), which is a legally binding contract.
Once the APS is signed and the deposit is provided to the seller’s rep, attempting to renege on the APS by saying, “Sorry, I’m no longer interested” is highly inadvisable. You will almost certainly lose your deposit. The seller also might sue you for damages for any difference between the amount of your offer and the amount they accept from another buyer, along with any additional legal fees and carrying costs. You don’t want to go down that road.
Deposits are sometimes returned to would-be buyers when conditions are placed on an offer and the conditions aren’t satisfied. For instance, if you make an offer on a house on the condition of financing, but your bank won’t approve it. Or your purchase depends upon the successful sale of your current home, but it doesn’t sell in time. Or you make your purchase conditional on a home inspection and the home inspector discovers a problem that stops you from moving forward.
If you can’t go through with the purchase because your conditions haven’t been met and you want your deposit back, you’ll have to sign a release form and get the seller’s signature, too. It’s a pretty straightforward procedure and sellers will usually go along with such requests. But if the seller suspects you didn’t act in good faith, they could refuse to hand over the money.
What happens next? Well, the deposit would stay in a trust account, usually with the seller’s brokerage, and the dispute between you and the seller would become a legal matter. If you and the seller are unable to arrive at a settlement, a judge could eventually release the funds through a court order. But I’ll warn you: that can take a long time.
It’s a myth that a seller can pocket a buyer’s deposit any time a deal falls through. Cases involving deposits of $25,000 or less can be decided in small claims court, which is relatively inexpensive and easy for ordinary Ontarians to use. Cases involving larger deposits, however, are decided in Ontario’s much more formal Superior Court of Justice. Court cases can quickly become expensive, so you should carefully consider all of your options before taking this route.
If you’re serious about buying this house, I strongly recommend working closely with both a lender — to get your financial ducks in a row — and a real estate salesperson before you commit yourself to a deal and hand over a deposit.
Source: By JOE RICHER Registrar, Real Estate Council of Ontario Sat., Jan. 27, 2018
Whether you’re a first-time buyer or a seasoned investor, there are new rules in 2018 that you will want to understand if you plan to buy a condo in Toronto. In this blog post we are going to explain the new rules and give you some tips to navigate them.
The 2018 condo market at a glance:
What are the new rules and changes?
We spoke with James Harrison, President of Mortgages.ca, to give us a full understanding of what to expect this year.
The new rules are simple:
As of January 1st, 2018, the Bank of Canada’s “Universal Stress Test” is in effect.
The buyer must now qualify for their mortgage based on the 5yr posted rate (4.99% today) or their contracted rate plus 2.00%, whichever is greater.
What does it mean for buyers in 2018?
“In my opinion, this will negatively impact one’s buying power by approximately 15-20% on average,” says James Harrison.
This stress test is an expected addition to the federal government’s measures to limit over-leveraged buyers from entering the housing market. In February of 2016, the federal government raised the minimum down payment from 5% to 10% for properties between $500,000 to $1 million. As we discussed in a previous blog post about those down payment rules and changes, the aim was to “reduce taxpayer exposure and support long-term stability.”
The newest round of stress tests is also about creating a buffer zone, but it applies to uninsured mortgages (borrowers with 20% down payment). Effectively, everyone applying for a loan through a regulated lender will now be stress tested. In a previous post, we explained in plain words how your buying power may change under the new mortgage rules.
“This will have a huge impact on some buyers but not all,” says James Harrison. “I believe this will negatively affect first time buyers as they tend to have lower incomes and also carry some debt from school. With one’s buying power negatively affected by 15 to 20% you would think this will mean prices will come down. I would be surprised if prices came down more than 5% in 2018.”
“For the well qualified buyers (those with higher incomes and little to no debt) 2018 will most likely see less competition, which could mean more of a buyer’s market. We have not seen this in a very long time in the GTA.”
“If you purchased a property prior to January 1st, 2018, you can still qualify for a new mortgage based on the old mortgage rules (with some lenders). Some top Brokers may also have lenders that can still qualify clients under the old rules (or at least using the discounted 5 fixed rate of 3.29% for example) and a 25yr amortization. This can increase one’s buying power by about 10- 15%.”
“If a buyer bought a property (same for pre-construction) prior to October 2016 (they could also qualify for an insured mortgage based on the rules prior to the first stress test for insured buyers). This is a huge benefit for some buyers of pre-construction units.”
What to do if you’re not approved for a mortgage under the new rules?
“If a buyer no longer qualifies to purchase a property they want they may have to look for a strong co-borrower to sign on to the mortgage to help increase the income and bring the debt services ratios in line. Unfortunately, this may mean a lot more potential buyers will now be looking for a rental property, which in itself is already very challenging in Toronto.”
Alternatively, there are mortgage lenders that operate outside The Office of the Superintendent of Financial Institutions (OSFI). The ‘stress-tests’ apply only to lenders that are regulated under OSFI, such as the Big Five banks, while some second-tier banks and credit unions fall outside the new rules. These lenders have often been painted as “shadow lenders,” but they do fill a gap in the home buying process.
For buyers who don’t approve under the new mortgage stress tests, these non-regulated lenders can be a viable option and many of them offer rates competitive with top tier banks. One thing to keep in mind, however, is that non-regulated lenders are still hoping to limit risk, which means they tend to prefer borrowers with strong credit history. If your credit is weak, you may face higher rates on your mortgage. As always, it’s best to do some research.
“It is more important than ever for each and every buyer (or anyone looking for a mortgage) to connect with a very experienced Mortgage Broker. Going to your local bank branch is simply not a smart option anymore and has not been for years, but the new stress test will show this even more. A good Mortgage Broker will be able to help explain this fully and find you more options. Even if you are a well-qualified buyer you may not qualify with your bank but you may still qualify for excellent schedule A products with another lender. Do not give up until you speak with a good broker.”
Why is the government implementing these new mortgage rules?
“The reality of these most recent mortgage rules is that the federal government has serious concerns with the level of personal debt loads in Canada. So, they are continuously coming out with ways to help make sure everyone can truly afford the mortgage they are taking on. I personally feel this was too much, and I would not be surprised if the government is forced to pull this back within the next two to three years.”
“I am optimistic that 2018 will still be a strong year in real estate, but realistically a lot of buyers may be out of the market completely. I expect that 2018 will most likely be the year of mom and dad providing the down payment and co-signing for the mortgage as well.”
“I strongly encourage each and every buyer to contact a well-qualified and experienced mortgage broker for all of their mortgage needs, whether it is a purchase, refinance, or renewal.”
With reduced buying power next year, expect house hunters to scoop up everything under $500,000.
Paul D’Abruzzo, an investment advisor with Rockstar Real Estate, says that while most people will qualify for less money on their mortgages, they won’t be completely shut out of the market. They will simply adjust their demands.
“If somebody was preapproved for $500,000, their new approval will be $400-450,000, so they will lose 10-20% of their preapproval amount,” he told CREW. “It won’t shut people out, it will just move them lower. If some were on the brink of getting approved, you’ll lose some there, but lower-priced properties will do very, very well.”
In Toronto, that will put single-family detached homes even further out of the reach than they are now, but the popularity of condos will keep soaring.
“In Toronto, with everybody’s sightline coming down, condos will be the most popular,” said D’Abruzzo. “In the GTA, like Mississauga or Vaughan, it will be condos and maybe townhouses.”
Single-family detached homes will become difficult, but not impossible, to afford. The Greater Toronto Area’s fringes still have moderately priced detached houses for sale, and even with the new mortgage rules, that won’t change.
“In Hamilton, Kitchener and St. Catharines, $400,000 gets you a detached home,” he said, “so you’ll see a continued trend of population spreading out into the horseshoe.”
According to D’Abruzzo, 2018 will not be kind to sellers—at least not through the first few months—but he recommends being patient.
“Right now, people are trying to get their places sold before the mortgage rules kick in,” he said. “Next year, inventory will be crap in January and February. If anyone is scared or fearful and waiting to sell their house, patience is the solution right now. Just wait and see, because nobody knows for sure what it will be like.”
Akshay Dev, a sales agent with REMAX Realty One, echoed that wait-and-see approach. While nobody will miss out because of too much time on the sidelines, Dev says Toronto’s chronic housing shortage will continue working in sellers’ favour next year.
“Whatever correction was needed is done, and in the spring we should see the market picking up and being strong,” he said. “In the Toronto area, there’s a huge shortage of housing, so it’s still going to be a seller’s market, but I don’t expect crazy bidding wars. Sellers will still get the prices they’re expecting.”
Contrary to popular belief, first-time buyers won’t have trouble purchasing starter homes, especially because cheaper abodes will be in high demand. However, they might live in those homes longer than the historical average.
“Historically, we’ve seen that when people graduate from their first buying experience, it takes anywhere from three to five years to move into the next level of housing, but it may become five to seven years with new rules,” said Dev.
Source: Canada Real Estate Magazine – by Neil Sharma 8 Dec 2017
Q: I am in the process of helping my daughter buy a condo, here is what we have done so far:
We signed the mortgage with her as primary and me as co-signer, I will be giving her the down payment and she is going to be living there and she will be the one paying the mortgage and all expenses.
My question is what would be the best way to do this transaction looking it at both a legal and tax perspective. From the tax perspective: How should I arrange/declare that I am gifting her the down payment on this condo? And when do we claim the tax breaks for her as a first time buyer? Would that be at time of paying the lawyer for land transfer etc.? Also, I would like to still be able to have some room on my credit as to buy another property so we were thinking if her owning 90% of the condo and me keeping just 10% would work for this purpose. According to the lawyer, we both have to have some percentage assigned because we are both on the mortgage.
From a legal perspective, we are thinking about joint tenancy as the best way to protect the asset if one of us passes away unexpectedly.
My intention is really just to help her “fly on her own,” but with all the legal and tax implications, we’d really like to do it in the best way possible.
A: Hi Claudia. First, let me congratulate you and your daughter! It’s wonderful that you are in a financial position to help her with the purchase of her first property.
It appears you’ve given the current and future implications of this decision a great deal of thought.
I can only assume that your lawyer has asked for a percentage split on the property because you are co-signing the mortgage and because you are opting to have both you and your daughter on title as owners’ of the property.
This legal structure helps limit the amount of taxes you owe, as you can specify that your share in the property is nominal, say 10%. Just keep in mind that each joint tenant can gift or sell their portion of the property. That means, your daughter has the legal right to sell her 90% stake in the condo even if you don’t want or agree to the sale. It also means that you are exposing yourself to creditors, should your daughter file for bankruptcy or become a defendant in a lawsuit. Finally, the 10% that you own will not be sheltered under the principal residence exemption as this property is not your primary residence.
But there is a silver lining. The Canada Revenue Agency does not tax gifted money. That means if you opt to gift your daughter the entire down payment to purchase the condo neither you nor your daughter are required to pay tax on that gifted money. If, however, lenders find out that this gift is, in fact, a loan, this can seriously impact whether or not your daughter can qualify for a mortgage as all debts (even loans to family members) are included in debt ratios used to qualify borrowers for mortgages.
Finally, your lawyer or legal representative handling this real estate transaction will take care of the paperwork when it comes to the first-time home buyers’ tax credits and rebate. That said, ask your lawyer to confirm that your daughter won’t be exempt from these credits because you are on title. According to the CRA, a buyer is disqualified from claiming these credits if they’ve already owned a home or they lived in a home owned by their spouse or common-law partner now or in the last five years. While it seems remote that your daughter would lose eligibility to these credits, it’s still better to check now than find out the hard way.
Source: MoneySense.ca – Romona King, November 13th 2017
While many first-time buyers look to condos as a relatively affordable option, one Toronto housing market expert says that it is actually less expensive to buy a low-rise home in the GTA.
According to Realosophy Brokerage co-founder John Pasalis, when you control for the size difference between low-rise and condos in the GTA, condos are more expensive per-square-foot.
In the Maple neighbourhood of Vaughan a 1,385 square-foot rowhouse costs $685,000, while a condo of a similar size in the area would likely cost $684 per-square-foot, or $947,000. It’s just one example of a price difference that can be seen across markets in the GTA.
Pasalis believes that this discrepancy in prices can be chalked up, in part, to investor demand.
“The majority of new condominium construction is driven by investor demand — not demand from families,” he writes in a recent blog post. “Investors are willing to pay much more (on a per-square-foot basis) than end users are.”
Pasalis says that investors prefer smaller units, which typically have a better return on investment, which means that developers are creating units that are too small for families, at prices they cannot afford.
“When developers are pricing a unit, they’re thinking to themselves, why would I charge this much when I can get this much?” Pasalis tells BuzzBuzzNews. “And those prices don’t make sense for a two- to three-bedroom unit, which is likely why we’re not seeing as many of those units being built [in the GTA.]”
In order for a condo to be good-value-for-money for a young GTA family, Pasalis says that low-rise prices would have to increase at a much faster rate than they currently are.
“The rate of appreciation for low-rise homes in the 905 region isn’t going to be very high in 2018,” says Pasalis. “So I don’t see this trend changing in the next year or so.”
While Pasalis admits that for families with a budget of $400,000 or less, a condo may be the only option for homeownership, he says that those with one of $700,000 or more should consider their options.
“They can choose to buy a two-bedroom 1,000 square-foot condo in Maple for that price, or a three bedroom 1,385 square-foot row house with a finished basement and backyard. For most, it’s a pretty simple choice,” he says.
Here’s what buyers need to know before signing on the dotted line in a private home sale
What if, while cruising around the neighbourhood on your bike, you spied a Private Sale sign on the lawn of your perfect home? What if, when you called the number, it turned out the sellers were in their 80s, had wildly overpriced their home and had been struggling to find a buyer for the past six years? Notice any red flags?
Buying a For Sale By Owner house
Stephanie Barker did, but the senior vice president at Arm Energy also recognized a big opportunity to own the house of her dreams—a four-bedroom, custom-built, one-owner with a large backyard and a converted attic office space. An Internet search, a generic sales contract and a lengthy phone call later, Barker and her boyfriend, Rob Maykut, became the proud new owners of a beautiful Canmore, Alta. family home, located just north of 8th Street. Were they mad?
For some, the idea of buying a For Sale By Owner (FSBO) home conjures up the image of a penny-pinching, emotionally charged seller flogging a defect-laden house. But if you’re in the market for a new home, choosing to avoid FSBOs may mean eliminating up to 25% of the homes currently listed for sale. Not a smart strategy. Instead, would-be FSBO buyers can learn a thing or two from Barker—and realize that, just like all real estate transactions, buyers of FSBOs simply need to do their own homework.
First: Know your market
Barker didn’t bat an eye when she heard how much the sellers wanted for their home. She already knew it was too high. “I’d watched the sales activity in the neighbourhood for at least six months. I knew what homes in that area were worth.” So Barker went in with an initial offer that was 50% less than what they were asking. “They didn’t even counter our offer,” recalls Barker. That didn’t stop her. “We had wiggle room, so I called the sellers.” For 45 minutes Barker discussed price, timing and conditions. “That conversation helped me appreciate where they were coming from and helped them appreciate where I was coming from,” she says. Once off the phone, Barker drafted a second and final offer. This time the sellers accepted. “I paid just a little over half of what the seller’s originally wanted and I’m sure we would never have reached a deal had we not been able to talk.”
Next: Get the right papers
Since the sellers were in their 80s, Barker took it upon herself to find a home sales contract online. “I didn’t want them to feel the added stress of trying to find a contract,” says Barker. She got lucky, says Jeff Kahane, a Calgary real estate lawyer. “At the end of the day a spit and a handshake is sufficient to close the deal, as long as nothing goes wrong,” Kahane says, But when things do go drastically wrong, it can be devastating. For instance, the bank can refuse to give you a mortgage if the home has a lien against it, if there’s a health advisory, the owners owe back taxes or the house is deemed overvalued by the appraiser. Quite often, even the seller is unaware of these potential pitfalls. “The sad fact is, it costs as little as $400 to get a sales contract from a lawyer, but you can pay $40,000 or more in fees to get out of a signed deal.”
Then: Do some digging
Getting an iron-clad contract is just the start. There are other pitfalls that can occur within a real estate transaction, explains Monika Furtado, a Calgary Re/Max real estate agent. For example, Ontario buyers can take legal possession of a property without a survey, but in Alberta a buyer must have a Real Property Report—a legal document that shows the location of visible improvements relative to property boundaries. “Neglect to ask for one and the buyer will have to pay $1,000 for the report to close the deal.”
Then there’s the measurements of a home. “Most sellers don’t realize that we have standards when recording home measurements,” says Furtado. “Like, the bottom level of a side-split shouldn’t be included in the total square footage because it’s below-grade living space.”
And what about a title search? While anyone can go to the land records office and pay for this document, not everyone understand what to look for and why it’s important. Furtado will often pull this document during the early stages of an offer. “I want to verify ownership, check setbacks and confirm there’s enough equity in the home to sell it,” explains Furtado. She’s known cases where sellers, caught with little or no equity, stay put in a sold house, refusing to vacate the home because they have no money to move.
Finally: Buy some advice
The big reason why a seller chooses FSBO is to save money on realtor commissions. “Nothing wrong with that,” says Furtado, “but because the house listing hasn’t been vetted by another realtor it often means a lot more work for me or the buyer.”
The key, says Kahane, is to get professional, knowledgeable advice. At the best of times sellers tend to inflate the value of their home, because of all they’ve put into it, while buyers struggle between emotion and logic. “You may go into Sears or Ikea 20 times before picking out a bed, but spend only 40 minutes before signing a contract to buy a home.” It’s one reason why Kahane is a strong advocate for representation—a real estate lawyer, a real estate agent and a home inspector. “These professionals have obligations and responsibilities to help and protect you.”
That’s exactly how Barker handled her last purchase: “I took my signed contract to my attorney. He looked it over and, once satisfied, we finalized the deal.” That’s how most transactions go, says Kahane.
But on those occasions when things don’t go so smoothly you have a choice: Pay a little bit of money for some good advice in advance, or pay a lot to fix a problem that could have been avoided in the first place.