6 reasons why I can’t buy a new home (yet)

Now that I’ve graduated, officially moved out of my parents home, and started earning a salary, I’m starting to get the same question over and over - “When are you going to buy a home?” In many people’s eyes, the next step in a millennial’s journey should be to secure that mortgage and stop throwing money away on rent. But it’s not that simple.

It’s true that first-time buyers have been a main driving force behind Toronto’s hot housing market, but there are still a number of reasons why I haven’t purchased a home and why many of my friends and colleagues in their mid to late 20s still choose to pay rent over a mortgage and I’ve listed a few of them below.

1) We can’t afford the down payment

One of the biggest challenges among young adults is coming up with the money for a down payment and qualifying for a mortgage in a market that shows no signs of becoming more accessible (yet).

A survey conducted by the National Association of Realtors in mid-June 2015 revealed that millennials make up 60% of the first-time homebuyers that find it difficult to get a mortgage. This is especially true if you’re living in Toronto. Rent is high in the city, and a significant portion of my income goes towards paying rent. Though owning a home may be cheaper in the long run, I simply don’t have enough money saved for a down payment.

2) We’re unprepared for an avalanche of additional costs

Even if I did have enough money for the down payment on a modest mortgage, I’d still have to prepare for the onslaught of charges that come with buying a home. Many in my generation aren’t prepared financially to deal with the extra costs that come with owning a small home or condo unit. If we’re struggling to put together a down payment, we surely can’t afford the home inspection, closing costs, insurance, condo costs, land transfer taxes, etc.

If we manage to afford some of these extra costs up front, we still need to be prepared for the price of annual upkeep. Older homes demand more attention, and even condo units can come with unexpected maintenance costs.

3) We witnessed the recession

Millennials are also wary about investing in general. Many people who are now at the prime age for applying for a mortgage started their careers during the economic recession. They’ve had to compete for jobs and carry a different perspective on traditional investments. There’s more anxiety around parting with hard earned money, leading to a greater reluctance to own a home.

4) We’re part of a larger cultural shift

Our reluctance to invest in the housing market is also part of a larger cultural shift that has been quietly taking place. Millennials are deviating from the path of the previous generation. Unlike our parents, we’re taking longer to settle into a career and many of us prioritize travel over a down payment on our first home. We’re highly mobile, and it’s difficult to pick up and relocate for your career or a working vacation when you have a mortgage to pay.

It’s also tough to ignore the declining rate of marriage among young adults. We’re taking longer to marry, we’re moving away from traditional family structures, and we’re less likely to cohabitate with a partner. Having two incomes contributing to a mortgage is much easier than shouldering the weight on your own. We’re now “experiencing a cultural shift that the homebuilding industry is still adjusting to,” observes Fortune Magazine.

5) We’re carrying more student debt

Collectively, millennials are carrying much more student debt than previous generations. In today’s job market, a university or college degree is mandatory for most entry-level positions, and we’re all spending more time in school, accumulating more student debt. Many of my friends are locked into long-term OSAP payment schedules with climbing interest rates, making it difficult to save any money at all.

6) We’re entering a new job market

Though our job market is slowly recovering from the recession, wage growth remains pretty slow. Young adults entering the job market are facing a very different reality than job seekers 30 to 40 years ago. We’re working longer hours for smaller wages, and we’re much less likely to stay in the same job for our entire career.

Instead, we’re always looking for new opportunities and are much more likely to move on to a better offer every few years or even start our own businesses. In an increasingly connected world, jobs are less likely to be tied to a specific location or city. Millennials are chasing their careers, moving to wherever the jobs are at that moment.

Are we renters for life?

Will I be a renter for life? It’s hard to say. The post-World War II dream is fading. Though many of us would tell you that eventually we’d like to own a home of our own, our immediate priorities and goals are taking us on a different path. When we do eventually decide to settle down and get a mortgage, we will be looking for different properties than the suburban lots our parents longed for. My friends and I will seek out properties with access to rideshares, located near good cycling infrastructure, in a city with a strong arts culture.

If the housing market wants to appeal to millennials, builders and developers need to respond to both our economic reality and cultural needs. In the meantime, my desire to move on a moment’s notice and ability to rent in a good location mean I won’t be getting a mortgage (just yet).