Calgary Real Estate Blog

Conexia – Home purchase intentions full steam ahead: RBC poll

March 9, 2010

Vast majority of Canadians view buying a home as a good investment

TORONTO, March 8 /CNW/ – Homebuying momentum in Canada continues to gain
steam with the portion of Canadians who are very likely to purchase a
home in the next two years rising to 10 per cent from seven per cent two
years ago, according to the 17th Annual RBC Homeownership Study. Younger
Canadians, aged 18 to 24, will lead the charge this year, with those
very likely to buy almost doubling to 15 per cent from eight per cent in
2009.

The RBC study conducted by Ipsos Reid found that 91 per cent of Canadian
homeowners believe a home is a good investment, the highest level in 12
years, and one-quarter (26 per cent) expect their home to be their
primary source of income when they retire.

“With the Canadian housing market showing continued vigour, it’s not
surprising that Canadians feel more confident in the long-term value of
owning a home,” said Robert Hogue, senior economist, RBC. “Exceptionally
low mortgage rates and improved affordability have been key reasons for
the resurgence in the housing market this past year.”

Most Canadians who intend to buy a new home in the next two years are
planning to take a fixed rate mortgage (44 per cent). However,
combination mortgages had the highest increase in popularity this year,
with 40 per cent intending to take both a variable and fixed rate
component, up from 32 per cent last year.

For Canadians planning to take a fixed rate or combination mortgage,
seven-in-10 intend to take a term of five years or longer. Sixteen per
cent said they intend to take a variable rate mortgage, down from 20 per
cent in 2009.

“Canadians seem to be opting for more caution this year and may be
factoring in potential rate increases down the road,” said Marcia
Moffat, RBC’s head of home equity financing. “Choosing a combination
mortgage can take some of the guesswork out of making a decision between
whether it is better to lock in to a longer-term or stay in a variable
rate.”

In the wake of the recent housing rebound, most Canadians (six-in-10)
also believe housing prices will rise in 2010, up significantly from 25
per cent in 2009. Similarly, a majority (64 per cent) believe mortgage
rates will be higher over the next year, also up from 33 per cent a year
ago.

“The expectation of higher mortgage rates on the horizon could be
motivating buying intentions this year. But it’s important that
homeowners – especially first time buyers – get solid advice about what
they can afford, not only today, but down the road,” added Moffat.

In addition to seeking customized advice from a financial advisor,
Moffat provides the following tips:

For homebuyers:

1. Lock in your rate when you apply for your mortgage.

Depending on your situation, there are rate guarantees that allow you to
lock in your mortgage rate for up to 120 days.

2. “Stress test” your mortgage for rate increases.

If you are concerned about affordability down the road, knowing what
your payments would be with a one – three per cent rate increase will
give you greater peace of mind that your new home is affordable both
today and in a few years time, when rates might be higher.

3. For first time homebuyers, leave some wiggle room.

With a pre-approved mortgage you will know what you can afford today.
But before making a decision to find a home at the top of your
pre-approval amount, also consider your current lifestyle preferences
and how future changes in your circumstances could impact your payment
comfort zone.

For homeowners renewing their mortgage:

1. Take advantage of early renewal options.

Some mortgages allow you to renew up to 120 days before the end of your
term. This means you can lock in your new mortgage rate early.

2. Consider a combination (hybrid) mortgage to manage your interest
costs.

If you are unsure of where rates are headed, consider splitting your
mortgage into part fixed and part variable. You will have rate
protection on the fixed rate mortgage portion, while you benefit from
today’s low interest rates on the variable rate mortgage portion.
Transmitted by CNW Group

Conexia – More young Canadians taking advantage of low interest rates in housing market

March 9, 2010

By Luann Lasalle, The Canadian Press

MONTREAL – Younger Canadians are expected to lead the way with home
buying this year as they take advantage of low interest rates, new jobs
and what they consider “good prices,” a bank survey says.

The survey for the Royal Bank suggested that 15 per cent of Canadians
between the ages of 18 and 24 were very likely to buy, almost double
from eight per cent in 2009.

It’s a marked shift in the attitudes of younger Canadians, who have
tightened their budgets over the past few years to cope with tough jobs
markets and the recession.

“Our poll found that 35 per cent of younger Canadians, between the ages
of 18 and 24, are intending to buy a home due to good real estate
prices,” Marcia Moffat, RBC’s head of home equity financing in Toronto,
said Monday.

The national average price for a home was $328,537 in January, according
to the Canadian Real Estate Association.

Thirty-one per cent of 18 to 24-year-olds surveyed in the online poll
said they would buy a house because of a new job. The survey also found
22 per cent in that young age group wanted to buy a home because they
considered interest rates were good.

CIBC World Markets senior economist Benjamin Tal said more young people
are getting into the real estate market, taking advantage of low
interest rates, lower down payments and more years to pay off their
mortgages.

Tal said he estimates the young people getting into the market as a bit
older, between the ages of 22 and 28.

“Basically parents are begging their kids to buy now because they
remember when they were paying 12 to 15 per cent mortgage interest,” Tal
said.

“So there’s a sense of urgency to get into the market and young people
are a part of it.”

Tal described the coming real estate market of the next three or four
years as “boring.”

“I think that what we are doing now is that we are basically stealing
activity from the future.”

The RBC survey also suggested that overall attitudes are changing as
more Canadians return to shopping for homes as the economy recovers,
even though it’s considered a seller’s market.

“Confidence in the housing market is back, essentially,” RBC senior
economist Robert Hogue said.

Royal Bank said the study found more Canadians are “very likely” to buy
a new home in the next two years.

Ten per cent of the 2,047 people of all ages surveyed for the study said
they planned to buy a home within two years – up from seven per cent two
years ago.

The RBC study also found that 91 per cent of Canadian homeowners believe
a home is a good investment, the highest level in 12 years.

“At this stage last year, there was doom and gloom all around and it
definitely affected the housing market,” Hogue said.

One-quarter of those surveyed, 26 per cent, said they expect their home
to be their primary source of income when they retire.

However, the surge in optimism doesn’t necessarily mean that Canadians
have forgotten about past economic troubles.

The survey found they are still more cautious when it comes to
mortgages. Forty-four per cent of those surveyed who plan to buy a home
in the next two years said they would take a fixed-rate mortgage.

Also on Monday, the latest new homes numbers showed that the annual rate
of housing starts were up in February.

The Canada Mortgage and Housing Corp. said that the seasonally adjusted
annual rate of housing starts reached 196,700 units in February, an
increase from 185,400 in January 2010.

Senior CMHC economist Bill Clark said the market is seeing a lot of
“catch-up” and consumers in Ontario and B.C. are likely trying to avoid
the harmonized sales tax before the summer.

“So if you roll all of that together it’s really sort of one big recipe
for housing starts to go up,” Clark said.

The report showed the gain was concentrated in the multiple starts
segment, particularly in Toronto.

Urban starts increased nine per cent to 179,100 units in February.

Urban multiple starts increased by 19.1 per cent to 89,900 units, while
single urban starts increased by 0.5 per cent to 89,200 units.

The annual rate of urban starts increased 28.6 per cent in Ontario in
February, 14.3 per cent in Atlantic Canada, 10.8 per cent in the
Prairies and by eight per cent in British Columbia.

In Quebec, urban starts fell 14.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of
17,600 units in February.