Since the early days of the financial crisis, the decision to buy a home has been met with a great deal of uncertainty. The top concerns haven’t changed much: will rates go up? Are we in a housing bubble? Is now the right time to buy? And, as prices climb and some lenders have started to raise rates, those on the sidelines may be increasingly anxious.
Frankly, for the majority of first time home buyers – especially those in Canada’s large urban centres – affordable options are shrinking. But are ownership aspirations following suit?
A Snapshot of the 2015 Market
The 2015 edition of the Annual State of the Residental Mortgage Market in Canada by Mortgage Professionals Canada (formerly CAAMP), reveals consumer sentiment around home buying is positive. But this is mostly among those who already own a home. The report, prepared for MPC by Will Dunning, Chief Economist and a member of RateSupermarket.ca’s Mortgage Rate Outlook Panel, provides an overview of the evolving state of the residential mortgage market.
Why are Home Owners Optimistic?
As prices rise, existing homeowners feel better and better about their decision to buy. The MPC report reveals 89 per cent of surveyed buyers between 2011 and 2015 said they were happy with their decision. And for good reason; the Canadian Real Estate Association (CREA) reports prices have climbed over the last seven years.
Regardless of where you live and when you got into the homeownership game, there is no denying you’ve seen an immediate return on your investment – in many cases a big one. Nationally, home prices are up 27 per cent in the last 60 months; those values are much higher in places like Toronto where values grew 43 per cent, and Vancouver where home prices have climbed 33 per cent over the same time period. But buying big can be a stressor: Dunning reports one third of those surveyed regret the size of the mortgage they took on.
Click here to find the best mortgage rates in Canada>
How Confident are Canadians?
With this sharp climb in prices, Canadians remain cautiously positive about the future of Canada’s housing market. Year after year, the MPC survey shows around six out of 10 surveyed are optimistic about the future of housing. As Dunning reports, most are expecting moderate growth despite prices sharply rising. Canadians may be split down the middle on whether now is a good time to buy, but, overwhelmingly, those surveyed believe real estate remains a good long term investment and that it is stable option over time.
The Case Not to Buy
Every year, around 5 per cent of Canadians buy or move into a new home. The report reveals most Canadians see mortgages as being so-called “good debt”, but some are still unwilling to take the plunge.
The top reasons for those choosing not to buy a home:
|6%||Worried mortgage rates will increase|
|30%||Lack employment / financial stability|
|16%||Waiting for home prices to decrease|
|30%||Want to grow down payment savings|
|10%||Can only afford to live with parents|
|10%||Buying a home is too stressful|
Almost a third of non-homeowners surveyed said they are happy with the situation they are in and have no intention to move or buy. Many are worried of a housing bubble and buying at the top end of the market.
Others are uncomfortable taking on a substantial loan to afford the house they want. They are willing to wait and see if prices drop. As well many are still choosing to rent, especially millennials who may not be certain if they want to make such a big financial commitment right now. Currently the biggest concern would-be homebuyers have is about their job. Many are worried their employment situation isn’t stable enough to buy a home. So although positive about the future, many non-homeowners are still not certain if this is the time to buy.
Safeguard Your Purchase
Whether you rent, own or are living with relatives, homeownership still remains a top goal for Canadians. Low interest rates have pushed up prices, in many cases dramatically. When you buy a house regardless of interest rate, ensure you can pay it a rate 2 percentage points higher than what the bank has offered. It’s the best way to ensure your debt is being eliminated and you’re ready for a rate hike should it come during your homeownership journey.