If you’re looking to buy your first home it’s likely you’re in the millennial age gap (1981-1996). According to a study released by the RBC Economic Research group in February, more than 40% of Canada’s homeowners are under the age of 35, the highest national rate in the world for this age group. It seems owning a house of your own is still a right of passage into adulthood for many people in our country. Calgary in particular has a millennial homeownership rate of 50.6%.
Despite the number of millennials investing in the real estate market, anywhere from 51% to 70% of millennial homeowners have regrets about their purchase. That’s a significant number of unsatisfied customers! Everyone walking down the road to homeownership looks forward to reaching their goal at the end. So what went wrong? What is leaving so many new homeowners with regrets? If you are thinking of walking this road yourself or you’ve already started, what can you do to avoid the same regrets your peers have?
Most house hunters know enough to get a pre-approval as soon as they step onto the road toward making their first home purchase. The pre-approval gives them a good idea of how much a mortgage will cost them. Unfortunately, this doesn’t include the other costs associated with owning a home. The most common regret millennial home owners have is not knowing the real cost of owning their own home.
The first cost new home owners often don’t anticipate are the new bills they didn’t have to worry about when they were renting. These are things like home insurance, property taxes, garbage removal, water and sewage, and heat. They also don’t take into account how much more their existing utilities like electricity will cost. When you rent there are a lot of things you don’t have to think about. But when you’re a homeowner you’re on the hook for everything. Do your research and find out what each and every expense will be and how much it is likely to cost. If there is a property you’d like to buy, make sure the realtor asks the current owners how much their bills have been over the past 12 months to get a good idea of what you can expect to pay once you move in.
The next cost many new home owners don’t plan for is that of regular home maintenance. These are things like having your gutters cleaned, replacing an old appliance, buying a lawnmower, repainting a room, updating the kitchen, replacing a broken fence or damaged roof, and so on. Experts will tell you to plan to spend 1% of the price of your home each year. For example, if you paid $400,000 for your home you can expect to spend $4,000 each year on regular maintenance. If you don’t spend it one year make sure you set it aside for the future. A new roof is a lot more than $4,000 and you’ll want to be prepared.
Another regret many millennial homeowners have is ignoring the advice of their home inspector or skipping the inspection altogether. Not only should you most definitely have a home inspection done before you close the deal, but you should make sure you have a good inspector. You don’t want to end up footing the bill for a repair that could have been easily spotted by a professional who took the time to do their job. If you do plan on making renovations or repairs, be sure to plan to spend more than you expect. Nearly half of homeowners say they ended up spending more than they expected on planned renovations.
New homeowners also regret depleting their savings by pouring all of it into their down payment. Doing this leaves you without a buffer. It’s safer to leave yourself some resources to take care of unexpected repairs or damage. Maybe a perfectly functional dishwasher passed the inspection before you bought the house but a week after you moved in it breaks down and leaves your main floor flooded. Perhaps you planned to rip up the carpet and discover the floorboard underneath a rotted. Even a great inspector can’t see everything. Plan ahead a leave yourself some money saved away for emergencies.
Aside from the cost of owning their own home millennials have other regrets. The first is buying a home they really weren’t in love with. This can happen if you’re in a rush to just buy something, anything. This can happen to young buyers who feel the pressure of keeping up in the rat race. It can also happen if there are limited options available. Or if your financial profile is weaker than you need in order to get approved for the kind of property you really need. If your house hunt is leaving you feeling less than enchanted, consider changing where you’re looking for a property or taking some time to improve your financial profile so that greater options open up for you. Taking just 6 months to a year can often be more than enough to change things in your favour. When you’re ready to come back into the hunt put together a list of items that are a must-have as well as a list of items you are willing to compromise.
Another major item young home buyers like to consider when they’re looking for a property is the neighbourhood the house is in. Often they choose a place with amenities that suit their lifestyle today but don’t consider what kind of needs they’ll have 5 or 10 years from now. Some millennials prefer a pedestrian community more in line with their current lifestyle. Shops, bars, and transportation all nearby might suit you now, but will it work for you when you get a bit older or decide to start a family? Does the community you’re looking at have parks and green spaces? Do you like the schools nearby? Is the noise and level of safety work for you? Are these things even important to you? It’s sometimes hard to know exactly what your life will look like years from now, but do your best to plan ahead so you don’t have to make an unwanted move.
Despite the high level of regret among millennial homeowners 79% still believe that homeownership is still a vital part of the American dream (according to a bankrate.com survey.) We can reasonably assume the same sentiment resonates among Canadians. In order to find the greatest rate of success in your house hunt, be sure to do as much research as you can before signing on the dotted line. Find out exactly what being a homeowner is going to cost you and be sure the home you choose is going to serve you in the years to come.