Home Ownership: Is Affordability Within Reach?

It's becoming an age-old question: Will I ever be able to afford to buy a home?

According to economist Brian Yu, the average cost of a home in Vancouver will increase to $517, 000. And mortgage brokers say that an annual income of $157,000 is required to get on the B.C. property ladder.

It's not just Vancouverites that are feeling the pinch. In August, a housing trends and affordability study commissioned for RBC revealed that affordability is eroding across Canada. For August 2011, the cost of home ownership in Canada averaged at $349,916. This is an increase of 7.7% from the same period in 2010. And, as if that isn't enough, this past summer, the Bank of Canada cautioned that it would be hiking interest rates. All this information is discouraging, isn't it?

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Not exactly. The dream of home ownership is a goal that can be achieved with out-of-the-box thinking and the willingness to let go of preconceived notions.

Conventional wisdom tells us that there are two ways to purchase a home: buying outright (sure, if you're a trust fund baby) or get a mortgage. But how many people explore the option of rent to own? Rent-to-own is a bridge strategy for tenants and would-be buyers. A portion of your rental payments are credited back to you at the end of your rental term. It provides the tenant with an 'option to purchase' the property at a future date for a pre-determined amount. My friend's parents made a special arrangement so she could purchase one of their investment properties. She's kept up with this arrangement for the past three years, and as a result, she has built a significant amount of equity inher home. All without having to make a hefty upfront down payment.

Another sign that affordability may still be within reach is the Bank of Canada's announcement that they will not be raising interest rates -- at least for now. Additionally, housing prices nationwide appear to be falling due to a balance between the number of buyers and sellers in the market. Adrienne Warren, a senior economist for Scotiabank notes, "They [housing prices] started to level out in July and August."

In many metropolitan cities there are areas that are being gentrified, which, is promising as prices are much lower than prime neighbourhoods. Indeed, it's more desirable to be living in a "good" neighbourhood now, rather than later. However, many homes in "good neighbourhoods" are overvalued. For a new buyer of average means it's wiser to live a little bit off the beaten path. Besides the benefit of moving into an up-and-coming neighbourhood, you'll likely get better value for your money and it will increase in market price, possibly in just a few years.

Look for a builder who looks out for the little guy. Daniel's Corporation has been an advocate for affordable housing for decades. Plus, their FirstHome™program has been turning the dream of home ownership into a reality for many Canadians. Low home prices and their Gradual Deposit Payment Plan have helped to break down the barriers to home ownership. For instance, they sell brand new condominiums and townhouses for as low as $145,900.

Finally, before you jump into home ownership, you should calculate whether or not you should rent or own. By calculating the cost of affordability before you start your search you'll have some insight as to whether now or later is the best time to get on the property ladder.

The race to home ownership has grown tighter over the past decade. As a result, the right time to buy will vary from person to person. Try to avoid heart-wrenching bidding wars, which, you know you can't afford to be involved in -- no matter how attached you've become to the property. If the price is beyond your means, it's simply a risk that you can't afford to take. Instead, actively seek out flexible, sensible home ownership arrangements. Happy hunting.