Confidence appears to be seeping back into the housing market, with young Canadians the most optimistic that now is a good time to buy, according to the Royal Bank of Canada's annual homeownership survey.
Thirty-year-old David Morris, who owns a condominium in downtown Vancouver, is among those actively planning to purchase a home. He's looking to sell his condo and trade up to a house in Vancouver's trendy Kitsilano or North Shore districts – a move that would have been out of his reach in the overheated real estate market of recent years.
Falling prices, low interest rates – and the fact that he is getting married at the end of this year – have factored into Mr. Morris' decision to buy.
“We have made the decision to move forward. It's not a situation where we're going to force it, but if we can find the right house for the right price, we have made the decision to get serious about it,” said Mr. Morris, a commercial real estate broker.
“From a buyer's perspective, it's encouraging …Now is a good time to come in and find a home that you love, that isn't going to break the bank.”
In a survey of 2,026 Canadian consumers, conducted in the second week of January, the Royal Bank found that 65 per cent of respondents believe it is a buyers' market now.
Of those surveyed, 9 per cent said it is “very likely” they will purchase a home or condominium in 2009 or 2010, and another 18 per cent rated the prospect of purchasing a new home as “somewhat” likely.
“Additionally, almost half indicate it makes sense to buy a home now versus waiting until next year.”
Young adults and renters are most likely to spark an upsurge in home sales, Royal Bank said in releasing its survey results.
“In the under-35 group, 48 per cent said they plan to buy, which is up sharply from 36 per cent last year. Renters also appear to be saying they are tired of paying someone else's mortgage payment, with 38 per cent planning to become homeowners in the next two years.”
Although this optimism is not reflected in the most recent sales statistics – the volume of sales in the Toronto area, for instance, was down 47 per cent year-over-year in January – Royal Bank predicts that lower prices will lure a growing percentage of Canadians back into the housing market in the next two years.
Toronto real estate agent Geon van der Wyst noted that consumers do not always follow through on their intentions – although it is encouraging that more Canadians appear to be thinking about buying homes.
“Intention is the step prior to making an educated decision… and I'm sure a lot of those people with intentions will move forward with purchases, it's just a matter of finding the right time,” Mr. van der Wyst said.
Karen Leggett, the Royal Bank's head of home equity financing, said low mortgage rates “and favourable housing prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase over the next two years.”
Ms. Leggett said the poll, conducted for the Royal Bank by Ipsos Reid, found that the vast majority of Canadians believe that the purchase of a home is a good investment. “The current economic environment does not appear to have dampened Canadians' overall confidence in the housing market,” she said.
Mr. van der Wyst said there are good deals to be had, from the buyers' standpoint.
However, he added, many prospective buyers – particularly first-time buyers – are still uncertain about the best time to plunge into the market.
“We tend to hand-hold these first time-buyers, nervous first-time buyers, especially around here where they know the prices are starting to dip – and who knows where they will continue to dip before the recovery starts?”
Mr. van der Wyst said that, especially in the current economic environment, he screens prospective buyers carefully before taking them to look at properties. He noted that the banks are also “pretty stringent” in qualifying consumers for mortgages.
“Interest rates are at historic lows and borrowing money is very, very affordable. If you have steady employment and you have some financial responsibility along with a good interest rate, now is a really, really good time to purchase a property,” said Mr. van der Wyst, an agent with Royal LePage.
“At this time, employment stability is very important. It would be really unfortunate to see someone lose their job just as they were about to close on a property,” he said.
A number of leading Canadian economists have observed that Canada's rising unemployment rate has eroded consumer confidence, and other recent housing forecasts have been less upbeat than the Royal Bank survey.
Canada Mortgage and Housing Corp. projects that, in spite of falling prices, the volume of existing home sales is expected to drop by 14.6 per cent in 2009, and then rise by 9.3 per cent in 2010.
Average home prices are forecast to fall 5.2 per cent to $287,900 in 2009. Next year, prices are expected to remain flat, according to the federal housing agency's forecast.
Ms. Leggett said Royal Bank is not forecasting “a huge housing rebound, by any stretch,” but there are reasons for cautious optimism that the market will start to recover later this year and next year.
Following the overheated market and bidding wars of the past few years, housing is once again becoming more affordable and there are good buying opportunities for consumers “who have good solid certitude around their job prospects and have the financial picture to be able to get into the market,” Ms. Leggett said.
“Buying intentions are one thing. Whether they translate into actual purchases, obviously time will tell,” she said. “But, anecdotally, we are hearing that there is heightened activity …and interest in the marketplace overall.”
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