Combating the Price War with Multi-Generational Housing
Desperate times call for desperate measures. The Fraser Valley single-family home median price has risen more than 40% in the past 12 months, and more than 50% in some areas. In the last 12 months, Abbotsford median price has moved a staggering 52%, or a median price of $815,000 to $1,292,500! These are desperate times if you are a buyer trying to get into a single-family home in the Fraser Valley or Vancouver area.
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What are your options to soften the sticker shock, or better yet, just make a deal in your budget zone? Yes, your budget zone. With the market moving at 3-5% per month, everything seems to be in a range, including your budget. The obvious and most popular way to make your budget zone work is to move east—down into the valley where homes are cheaper or less expensive. Others are forfeiting their dream of owning a single-family home and settling for a townhome or rowhome. If one cannot have a single-family home, a small compact home with a common wall and a small patch of grass for the “Covid puppy” and children to enjoy is the next best option.
These are the traditional ideas of housing, but what if you do not want to disrupt your family’s entire life and move to a new community? Moving is disruptive as it is, but moving to a new community means new schools, doctors, banking, and friends. You are leaving all that you know and have built. Additionally, you may even be leaving family behind (jokingly, maybe that is a good thing for some of you).
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For those of you that love your family and surroundings, a solution and trend to combat the crazy price war and continue to live in your current community may be to create a multi-generational home. Multi-generational housing offers not only an opportunity to share the cost of the home with others, but it also allows for a different lifestyle that can be beneficial to the different homeowners.
By definition, a multi-generational household in Canada is a household with three or more generations living under the same roof. This concept of housing is not new, especially outside of Canada, but it certainly is gaining momentum for a number of reasons. The real estate extremes in the Fraser Valley and Vancouver markets are helping to fuel this trend.
Another contributing factor to this trend is demographics. With baby boomers aging and in need of care and support, more families are open to the idea of multi-generational housing. Often times, these baby boomers are sitting on piles of money and can help with the purchase of the home, making the budget zone a little easier to work with for the younger family members involved in the purchase.
There are some major benefits when purchasing a multi-generational home. In most cases, the presence of an aging parent in the purchase process increases buyer power and options within the community they are currently living in. The concept of a multi-generational home will have four or more income earners. As a result, there is potential for a larger down payment, and of course, a larger mortgage to purchase a home that a traditional family would not be able to afford. With a larger down payment and a more lucrative income, there is access to a larger pool of homes.
Another benefit to multi-generational housing? The speed at which the family can pay down the mortgage. You have heard of the saying, “Many hands make for light work.” Well, many incomes make for balloon payments and short amortization periods, which pay down the mortgage at a record speed. The benefits to multi-generational housing are not just limited to financial gains; having multiple families living under one roof is also good for the environment. These homes take up less space or valuable land, which continues to drive prices up. It also requires far less energy per person than a traditional single-family home. Childcare, senior care, and even food prep and meals can make for a more holistic lifestyle.
So, what are the downsides to living in a multi-family home? Words like, compromise, privacy, wants versus needs, delegating, responsibility, ownership shares, confinement, lack of space, and feelings of injustice are just a few. For many of us that have not lived in a multi-family home or been raised in this setting may struggle with this concept. I have had numerous clients use this concept to purchase their first home, or have upgraded to a larger home or property with this concept. For the most part, the multi-family purchase has gone well; however, a few cases have resulted in strained relationships. In these less-than-ideal situations, things have not gone well mostly because the plan of the multi-family ownership was not treated like a business.
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The multi-generational home ownership success stories that I have seen have a written business plan and legal agreement—essentially a shareholder’s agreement. Think about it: would you enter into a multi-million-dollar business with partners and not have a business plan and shareholder’s agreement? Treating the purchase of a multi-family home is no different. Good agreements make for good friends, or in this case, good family.
As I said earlier, desperate times call for desperate measures. Multi-generational or multi-family ownership may be the best way for a homeowner to afford and live in the community of their choice. In addition, they can stay connected and care for their aging family, live a more environmentally sustainable lifestyle, and become mortgage free in a shorter period of time.
These are desperate times if you are a buyer looking for a home to purchase. The December stats and STR (Sell Through Rates) are not encouraging for buyers. Inventory for all property types continues to be at all-time lows. In many cases, inventory levels are 20-60% less than December of 2020 making for a market that continues to breed multiple offers. Sellers continue to hold all the cards. If you have contemplated selling, I would encourage you to take advantage of the market in the next one to three months. The Fed’s have hinted at increasing interest rate and the net result of a rate increase would be fewer sales and certainly less multiple offers. I also find it hard to believe that prices could and will rise at the pace they did over the last 12 months. Reach out if you have any questions about the market or how it may impact you.
Please reach out to our team for more information or help with all your real estate needs.
Click Below To See The Fraser Valley Stats:
Click Below To See The Vancouver Stats:
STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales
Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com
