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First-time buyers remain challenged
While higher housing values and tight inventory levels have hampered home-buying activity so far this year, longer amortization periods and alternative housing types have offset the impact on most major Canadian markets, according to a report released by RE/MAX.
Despite a higher degree of frustration in the marketplace than in previous years, the RE/MAX Affordability Report found that first-time buyers, in particular, remain steadfast in their determination to purchase a home. In fact, entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom, to overcome challenges such as rising prices and serious supply issues. Innovative financing has become key to homeownership in today’s environment – with longer amortization periods gaining favour in 62 per cent of the major centres surveyed. Low or no down payments were popular with first-time buyers in 38 per cent of markets.
“Doom and gloom reports coming from south of the border have yet to hinder overall momentum,” says Michael Polzler, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada. “First-time buyers are still leading the charge, taking advantage of every resource available to achieve homeownership. They’re determined to get into the market sooner rather than later. If suburban locations, smaller condominiums and town homes, or a little sweat equity is what it takes to get into the market, these purchasers are game.” Inventory levels, however, remain one of the foremost concerns facing purchasers across the country. A shortage of available entry-level product was identified as a major obstacle impeding buyer intentions in three-quarters of markets surveyed in the report, including St. John’s, Moncton, Fredericton, Halifax-Dartmouth, Ottawa, Greater Toronto Area, Hamilton-Burlington, Niagara Falls, Winnipeg, Regina, Saskatoon, Greater Vancouver, Victoria and Kelowna. “First-time purchasers continue to play a pivotal role at both a local and national level,” says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “The impact they have on the housing market is significant, as they are the impetus for sales in the mid-to-upper price ranges. As long as this segment of the market remains healthy, the real estate outlook will continue to be favourable.”
Although average price is the barometer for housing values in most major centres, first-time buyers looking to achieve homeownership consider starting prices a more meaningful gauge of affordability. Starting prices can be substantially lower than the market average. For example, average price now approaches $400,000 in the Greater Toronto Area, while the starting price for a detached home can be as low as $300,000 in areas east and west of the city.
The best value for the dollar continues to be found in the suburbs. For those unwilling to sacrifice on location, small condominium units in new developments and condominium conversions of rental buildings offer up the next best alternative. Condominium conversions in some of the country’s major centres can be picked up as low as $150,000 to $175,000.
See the RE/MAX Affordability Report
April 24, 2008 in Buying Toronto Real Estate | Permalink
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Comments
@ Toronto Real Estate
Dude, 99% of single women don't want anything to do with you because you live with your parents? First, I totally believe that (I moved out at 18, and a lot of girls liked that) and second, seriously, you can't take it with you. Get on your horse and move out. Today. Rent, buy, lease, steal, whatever.
Posted by: | Apr 25, 2008 11:40:43 AM
Toronto real estate agent,
Do you really believe what you're saying?
1) Buying a house is about shelter, not a social goal. W
2) Why are people keen on investing? Because they've bought into the lie that real estate always goes up. This is not true.
3) The market is balanced, but not in equilibrium. It's on a downtrend, which is not convenient for buyers (buying at a peak).
4) Detached houses have lost their popularity because people can't afford them. The low demand will cause inventory to rise and prices to fall.
5) Condos have never seen such demand because people who would rather buy a detached home can't, and settle for condos. As the price of detached homes falls, the price of condos will fall more quickly as demand shift back to detached.
5) The US crisis isn't simply the US crisis. The nature of the problems vary significantly throughout their nation. We will have similar problems, depending on where you live. Toronto is considered "seriously unaffordable" (see link), a sure sign that their will be a correction of some sort. If someone wishes to buy a house now to be their home, go for it. But be ready for a 15-30% drop in price over the next few years (personal estimate).
http://www.demographia.com/dhi-ix2005q3.pdf
Posted by: Al | Apr 25, 2008 9:06:44 AM
To buy your house is like to achieve your social goal and Canadian are very keen on investing into real estate. As working for a Toronto real estate company I think that this period is very convenient for the first-time buyers because the market is balanced. The deatched houses have lost their popularity and it`s not surprising however the Toronto condos have never seen such demand. Many people are worried about the US crisis would hit the market but I think that these rumours are unfounded.
Posted by: Toronto real estate agent | Apr 25, 2008 6:51:34 AM
Those dying to buy their first house or any house period in the GTA need to ask themselves why they are in such a dire need for a house right now. If your rent is too high, may be find a roommate, or downsize. Or, move with family, or some house that's missing some bells and whistles.
I met a very educated immigrant who recently came to Canada and the first thing he did was to buy the very condo he was renting in Mississauga. With a child, and a non-working wife, his finances suddenly ran in the red every month. I am a 28 year old male who lives in a 1700 sq ft home with 2 other family members. Sure, 99% of the single women don't want to have to do anything with me but in the last 3.5 years, I've saved well into the 6 figures. I have a portfolio that's doing well. I own my own car, half an acre outside Edmonton, and have plenty in a rainy-day fund, and in the next two years I'll have over 200k saved up.
Why you can't do something similar or choose not to, is beyond me.
Since roughly 1994 housing has only gone up. That's what most people in toronto area are used to. But there are some of us who remember 1989-1994 when every third home on a block had a power of sale sign up. Do you really think that with the price of gas being what it is, that homes on north west end of brampton guzzling thousands of cubic feet of gas per year will be worth as much?
Posted by: RKN | Apr 24, 2008 10:31:02 PM
Inovation of credits lines and low interest is nothing, real problem is overvalued prizes about 25 % or even more. I will accept mortgage 25 years term with 8% interest and 25 % down paiment, rather than 40 years with 0% down and prizes up 25 %. So where is logical thinking about mortgages and our grandfathers mortgages deals with over 100 years are they were stupid? . Is coming realy,realy bad time for houses in Toronto and Vancouver.
Posted by: | Apr 24, 2008 4:57:45 PM
Where the US leads, we follow. Even when it's stupid.
"Innovative financing has become key to homeownership in today’s environment"
This is bad.
Posted by: Al | Apr 24, 2008 3:29:12 PM
Hi,
I'm a potential first time buyer and at least in my case, this article is true.
I have adjusted my expectations on size, location and yes, even my long term financial freedom.
I started out with a budget of $300K and now am at $375K without any success.
After seeing over 90 homes, I am convinced that the housing market is over priced by $80K (in my range) and that my first purchase is going to end up being something I am not entirely happy with. I am also certain that any purchase within the next 6 months will not yield much of a profit.
What I still fail to understand is why people in the market, paying so much for a home? Is the public largely unaware of the true value of the homes they purchase?
-Unscripted.
Posted by: Unscripted | Apr 24, 2008 2:58:55 PM
"starting price for a detached home can be as low as $300,000 in Toronto"?.Could you find any newer house up to 5 years old,1700 sq feet in West Etobicoke,South Mississauga.I need mortgage 100 years for those houses.In all markets in the world you have variation up and down,but in Toronto and Vancouver only up? Less buyers but still prizes going up? Hmmm, intersting unique market in the world. It looks like Komunizam market or only sellers market so will see in the next 3 years?
Posted by: Mike | Apr 24, 2008 12:40:48 PM
