• Can someone please explain how to make home purchases affordable?

    Doing everything right still isn’t enough

    By all accounts Vivian did all the right things society instilled in us. She worked hard in school and became a teacher, has great credit, and saved for a down payment. Yet on a Wednesday night, I helped console her as she did not qualify for a purchase of approximately $500,000 in the centre mall area of Hamilton.

    A teacher can not get approved?

    In the mortgage world it is not often a teacher would not be approved. The home was modest and considered entry level to today’s standards. If Vivian can’t make it, what does Hamilton housing look like going forward? What about my two daughters? What about everyone’s kids?

    What can we do to make a house purchase affordable today?

    It humbles me to say this but every idea I came up with had consequences and no solution.

    Demographics

    The baby boomers will get older and sell off their homes.

    The problem: this will occur 10 to 20 years down the road and Net cannot help us now.

    Supply shortage

    There is an imbalance of buyers versus sellers.

    The problem: between development charges and in here in Hamilton the public testing for more urban sprawl, and abundance of new housing does not look promising.

    A recession

    A deep recession similar to the early 90s would cause a downward shift in home prices. The psychology goes if you lose your job or afraid of job security, you sell your home and you certainly don’t buy.

    The problem: it hurts many Canadians who just bought in the last few years. Recessions are very difficult for the economy and the market changes to a buyers market.

    Government

    Provide incentive to fix the supply issue

    The problem: the lowering of rates to record levels and the rise and the stress test has only exacerbated the housing market.

    Longer amortization.

    By increasing the amortization levels, clients like Vivian could afford her entry-level home.

    The problem: this will create more problems as affordability will go up and it will not help the supply issue at all.

    Remove Covid stimulus

    Many Canadians including myself really cannot gauge what the economy’s strength is, or lack thereof.

    The problem: many Canadians were saved by the stimulus. Will we have a negative reverse reaction if government checks stop coming?

    If anyone can kindly suggest how to make house purchases affordable because I cannot.

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