A lot has changed in the past few decades. Those changes have shaped the way people live today, and the new traditions that have been created. Unfortunately, one of those new traditions is first time home buyers needing financial assistance from their parents in order to obtain a home.
According to the Ontario Real Estate Association, roughly 4 in 10 parents helped their children between the ages of 18 to 30 with buying their first home, apartment, condo, or other property. Of the people getting financial assistance from family, the average amount of money in a financial gift is $71,000, and the average loan that parents provide is upwards of $41,000.
A big reason for the increase in financial aid is because home buyers 20-30 years ago are very much benefitting from the enormously rising home prices and can afford to take some equity out of their home to help out their children. People also truly believe in the value of home ownership. 92% of people believe that they need to do what they can to supply younger generations with the opportunity to own a home. A home provides economic stability and confidence in a person that is very important, and homeowners today want that for their younger generations.
The financial assistance may seem like a big bonus for the younger generations, but it is necessary. Home prices have increased so much that now the average home in Canada is almost eight times the average household income. In 1980, the average home cost between two to three times the average household income, and that widely shows how much home prices have increased compared to salaries.
On top of this, many first-time home buyers are dealing with other issues. The average student debt today is roughly $25,000 for a graduating student. Students are also expected to attend more years of school compared to the past, leaving them less years to work full time before feeling the need to hit the real estate market. Unfortunately, this also affects their career opportunities, as the younger generations are more likely to grab a job for financial stability rather than looking at where their true skill set is, or what their dream career may be.
In January of this year, home prices were calculated to have gone up 21% higher compared to just a year earlier, and 46.5% since just two years ago in January of 2020!
It is hard to catch up to those rising house prices that continue to skyrocket upwards. Our younger generations have reason to need financial assistance, and on top of rising home prices and increasing inflation, the generation has been hit with labor shortages during COVID-19 setting them back two years.
Unfortunately for first time home buyers, the short-term future of the housing market only seems to be pointing in an upward direction. The average minimum down payment is $50,000 across Canada, and on average that takes a person six years to save for a down payment, which is an increase of double since 2000.
Being a first-time home buyer has never been harder than it is today. That being said, there are strategies to help create an easier home buying experience, with or without the help of a parent. In our next blog we will discuss the best steps to take as a first-time home buyer and why we think entering the market is still a very great idea. Although the housing market is very hot right now and can be overwhelming, homes do still provide a lot of financial stability and can be a great long-term investment.
