Canada’s housing market may not be roaring back just yet – but a surprising upturn in fortunes for first-time homebuyers is presenting room for optimism looking ahead, and with it, opportunities for mortgage brokers.
RE/MAX Canada’s fall housing market outlook revealed that 25% of Canadians are not only actively saving to purchase a home, but confident of their prospects in doing so, with a sizeable percentage of that cohort (35%) made up of younger millennials and Gen Z buyers.
High rates and affordability woes have long bedevilled first-time homebuyers, but the real estate giant’s president Christopher Alexander (pictured top) said its latest findings pointed to potentially better times on the horizon for many new buyers, meaning new business for brokers.
That’s especially the case with interest rates recently dropping and new inventory hitting the market in some prominent urban areas. For a prolonged period “those demographics were giving up,” Alexander told Canadian Mortgage Professional, “and now there’s some renewed help, which is really encouraging – because the first-time homebuyer kind of starts the cycle for the different market segments.”
Optimism may be on the rise, but that’s not to say the affordability crisis has improved dramatically as a result of falling interest rates – either for current owners or hopeful buyers.
Fourteen per cent (14%) of current homeowners say they need to renew their mortgage soon and may need to sell their home because of present high rates, according to the RE/MAX report, and saving for a home purchase has also fallen firmly behind daily expenses such as utilities, food, and travel in Canadians’ current financial priorities.
Still, lower rates on both the fixed and variable sides are pointing to an encouragingly steady market in the months ahead.
RE/MAX said “green shoots” were appearing amid a flurry of rate cuts by the central bank – and most regions are likely to see sales price growth from 1-6% before the end of 2024.
Alexander said plenty of positive signs were appearing for the nationwide market, but cautioned against expecting too quick a recovery. “Affordability is slowly improving, at least in the housing sector, because of decreasing interest rates – but we still have a ways to go before we get a lot more consistent market activity,” he said.
Consumers may have plenty of choice in the current environment, Alexander said, but “slowly but surely that available inventory is going to start to get eaten up or consumed, and we’re going to be back to a very competitive marketplace – probably in the second quarter of next year.”
Why subdued home construction could spell trouble ahead
Against the sluggishness of the overall mortgage and housing markets in recent years, it’s easy to forget that housing starts have also failed to pick up substantially, remaining well below the level viewed by Canada Mortgage and Housing Corporation (CMHC) as necessary to restore affordability by 2030.
That could spell trouble if the market rebounds as expected by RE/MAX. “Unless there’s a big spike and acceleration of building, there’ll be a limited amount of time consumers have,” Alexander said. “I do think, though, with the rates the way they are and the cost of living – not just real estate prices being so high – that if we do return to very frenzied bidding wars, I’m not so sure we’re going to see massive leaps in pricing. But mid- to high-single digits would be welcomed by most.”
While rate drops may have strengthened hopes that a market resurgence is around the corner, Alexander noted his surprise at predictions of a continually tepid market for Kitchener-Waterloo, heavily driven by the Greater Toronto Area (GTA).
What’s more, a strong majority (77%) of Canadians expressed a belief that the steps taken by governments at all levels are insufficient to solve the national housing affordability crisis.
That comes as little shock, Alexander said. “The key is we still don’t have a national housing strategy that involves the three levels. There’s been a lot of broadband promises, but at the end of the day we’re lacking in a coordinated, conscious effort to build more homes,” he said, “and population [growth] means that we’re going to have some competitive challenges ahead of us with real estate prices.”
CMP
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