In February and March of 2020, it became apparent that the COVID-19 pandemic would become a destabilizing force in Canada. Leaders moved quickly to establish restrictions and initiate lockdowns to combat the spread. Some believed that the housing market would be one of the key casualties of the pandemic. This presumption was proven wrong in a big way.
Millennials have grown understandably anxious during this period. Today, I want to discuss whether prospective millennial home buyers should stand pat or jump in as soon as possible.
Canada housing: Why millennials should be patient
Canada house prices have erupted in the year-over-year period. In May, a new Oxford Economics research report suggested that Vancouver, Toronto, and Hamilton were among the least affordable cities in North America. According to Generation Squeeze, a millennial must work on average 14 years in Canada, 24 years in the Greater Toronto Area (GTA), and 28 years in Metro Vancouver to put a 20% down payment on a home.
This kind of financial commitment is not to be taken lightly. Moreover, an economy in recovery may mean a return to tightening interest rates. This could work to cool a red-hot housing market in the years ahead.
Counterpoint: Millennials should get in as soon as they are able
Patience is a virtue, but the Canada housing market continues to ride strong fundamentals in the price department. Recent history tells us that central banks will move with extreme caution when it comes to raising interest rates. Meanwhile, low supply, soaring demand, and high immigration will underpin the housing market.
Real estate prices have surged in Canada, but homes are a historically dependable asset. Millennials who qualify should not sweat the details of timing. This is the same principle as the stock market. Those who attempt to time the TSX will be more frustrated over the long term.