The Real Estate Market is Prime for First Time Home Buyers

They’re back… — but if they’re not, they should be. A few years ago, before diminishing affordability sent them scurrying to the sidelines to continue to share accommodation or hang out at their parents’ homes, first-time buyers were a force to be reckoned with.

If they had full-time jobs and could muster together five per cent of the value of a home for a down payment, they were in.

They were the starting point that set the whole chain reaction in motion.

They would buy a resale home and the sellers would move to something else, and those sellers — well, you get the idea.

I recall a housing seminar that strongly suggested first-time buyers were accountable for something like 35 per cent of all homes sold in Calgary.

Then, prices started to jump. Homes were selling in a matter of hours at above asking prices.

Multiple offers forced many potential purchasers to bail because their budgets just weren’t high enough to compete.

Sellers, meanwhile, were reaping the benefit of being behind the steering wheel.

Well, things have turned. Firsttime buyers are back in the game, if they want to be.

Sellers are having to bring their asking prices back to more realistic levels to attract an anxious, but cautious, pool of buyers who know they now have more say over what happens in the marketplace.

At the same time, though, jobs are being lost in some sectors, salaries are likely being frozen, and consumer confidence has taken a hit. While there is some pent-up demand for homes, the buyer pool has gotten shallower. Sellers have to realize this.

There also seems to be a new emphasis on quality now that the market has somewhat calmed.

Bill Bobyk, general manager of the Sterling Group of Companies, says there are two basic reasons people should be buying: “very good” prices and attractive mortgage rates.

Another factor to consider is that “because this is not the market to be flipping homes, people should be buying with the intention of living in them for a few years,” he says. “Buy them because they can be homes, not a shortterm investment.”

Another thing to remember are the tax breaks for buyers and home renovators in February’s federal budget, presented by finance minister Jim Flaherty.

“The federal government’s recent budget has added more reasons for Canadians who aren’t yet homeowners to consider entering the real estate market this year,” says Gary Siegle, Calgary-based regional manager for mortgage brokerage Invis. “For those who are feeling secure about their income and want to take advantage of low rates and a more affordable market, the budget provisions could make an enormous difference in terms of the properties they can afford.”

Homebuyers can now withdraw up to $25,000— up from $20,000 — from their RRSPs as a down payment under the Home Buyers Plan.

Secondly, they can qualify for a $750 tax credit to help them pay for closing costs, such as appraisal or legal fees.

“We are now seeing more firsttime buyers seriously considering making the jump this spring into ownership,” says Siegle.

In this type of market, there is room to negotiate with sellers on prices as well as any other terms set out in the listing, such as possession date, appliances being added, and home inspections.

There are plenty of homes to choose from, so don’t rush things.

Original Article from Calgary Herald:
MARTY HOPE
Calgary Herald
28 Feb 2009

Calmer Housing Market Brings Opportunities for First-Time Buyers

The numbers are in, and they bring good news for Canadian homebuyers. Price growth is beginning to ease up across the nation, according to Genworth Financial Canada’s Metropolitan Housing Outlook  report. For new and resale homes, price growth has quadrupled since 2001, but is expected to slow over the next five years, allowing potential homebuyers to feel a little breathing room.

If you are in the market for a new home you may want to check this out…

Calmer market ahead

In 2008, the rate of price growth should drop about 50% from last year for both new and resale homes across Canada. The return to historically normal levels will give consumer incomes a chance to catch up and buyers should feel less pressure and more opportunity to explore all the choices and financing options available to them.

“Now we’re seeing a calmer market,” said Peter Vukanovich, president of Genworth Financial Canada. “That translates into better opportunities for first-time homebuyers to make an informed decision.”

For homebuyers, this more stable growth is a welcome change from the increases in recent years. Both 2006 and 2007 saw an 8.7% increase in the price of new homes, and there has been a 10.2% average jump in the price of resale homes each year since 2002.

“Rapid price increases, which were virtually unsustainable in regions like Alberta, had begun to erode affordability and put a lot of pressure on first-time homebuyers in terms of their decision-making process,” said Vukanovich.

Housing market still strong

Overall, Canada’s housing market is expected to remain strong, supported by steady demand and modest price increases across the country. This year’s national average new home price is forecast at $397,789 (a 3.8% increase) with the 2008 average resale home price expected to reach $322,424 (a 5.1% increase). Regionally, the strongest housing demand can be found in B.C., Manitoba, Alberta, and Saskatchewan, as a result of the commodity-fuelled economic growth in the West.

National housing starts, however, are expected to ease to just below 215,000 units this year and 194,000 units in 2009. This represents a 15% drop, after eight years of steady increases. The drop in single-unit starts is expected to be greater than for multiples, reflecting the number of empty nesters looking to downsize and the affordability of these properties for first-time buyers.
Mortgage rates to drop

Mortgage rates will also see a drop this year as the lowered Bank of Canada interest rate flows through to the mortgage market. The average five-year conventional mortgage rate is expected to be 7.0% in 2008, dropping slightly to 6.7% in 2009.

For further report details, including regional numbers, download the full report.

More modest increases ahead

Canadians can look forward to more moderate price increases for new and existing homes across the country in the years ahead.

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