According to a new study by RBC Bank, the Canadian housing market could be facing some major challenges in 2013 if interest rates begin to rise. For young adults these rates and the overall costs may be a factor for living with mom and dad.
Craig Wright, senior vice-president and chief economist, RBC, said in a press release, "Assuming the European crisis remains contained and fiscal challenges in the U.S. are addressed, we expect the Bank of Canada to start normalizing interest rates early next year. This could cause further deterioration in affordability. We think that the central bank will proceed gradually with rate increases and that household income will continue to grow. Both of these factors should lessen the negative impact on the housing market."
Simply said as long as all other factors remain positive homes will be within the reach of those with good paying jobs.
The Toronto Star reports that housing costs should not be more than 32 percent of a household income. With the expected increasing interest rates that percentage could easily be rising turning some homeowners house poor.
In Toronto the housing market has shown a modest deterioration in affordability for the second straight quarter of 2012. Most of the stresses are within the single family home market. These stresses will be a factor in the coming period with house buyer demand.
During a conversation with a group of young professionals last night owning a home of their own is not in reach at this time. While condos are an option many feel that the cost of a small unit is not worth the cost opting to either rent or live with their parents while saving for a home of their own.
Living at their parent's home during their 20's and early 30's has been increasing in North America. The trend has some sociologists changing the milestones for the transition to adulthood that includes graduation, leaving home, financial independence, marriage and parenthood. A 25-year-old in the early 1970s had already hit many of these markers compared to the typical Canadian 30-year-old in 2001.
Some of the earlier markers are simply unattainable for the majority of young adults. Unemployment rates, high rents, high food costs and student debt are all factors when it comes to remaining at their parent's home.