Housing affordability is becoming a top priority for voters in the upcoming federal election, says Penelope Graham, managing editor at Zoocasa.
“However, given the vast geographical size of Canada and its many market nuances, buyers’ ability to purchase a home varies widely depending on local prices and incomes,” says Graham. “The Canadian Real Estate Association has noted a growing gap between price growth in Eastern and Western Canada, with improved affordability concentrated in the Prairie markets, as well as parts of the Maritimes.”
Zoocasa conducted a study to find out how feasible it would be for households on a median income to purchase real estate in Canada, finding median-income households would be able to afford the local benchmark-priced home in eight markets of the 15 markets studied.
“In the remaining seven, a median-income earner wouldn’t qualify for a mortgage large enough to fund their home purchase and would need to supplement it with a hefty downpayment, which, in some urban centres, would require a savings timeline that spans decades, assuming they set aside 20 percent of their total income each year,” says Graham.
In determining the extent of affordability for median-income households, Zoocasa calculated the maximum mortgage they’d qualify for in each region, assuming a three-percent interest rate, 25-year amortization and that the equivalent of one percent of the total home purchase price would be put toward annual property taxes. An additional $100 per month for heating costs was also factored into the calculation.
“Similar to CREA’s observations, Zoocasa’s calculations reveal housing affordability is most prevalent in the Prairies, accounting for five of the most affordable markets,” says Graham. “In these cities, home buyers with a median income would qualify for a large enough mortgage to purchase the average or benchmark priced home, so long as they have the required minimum downpayment of five percent.”
A median income wouldn’t get far in the British Columbia and Ontario real estate markets, says Graham..
“In Greater Vancouver, where the benchmark home price is $993,300, a median-income household earning $72,662 would qualify for a mortgage of only $241,994, leaving a shortfall of $751,306, 76 percent of the total purchase price. That would take a household setting aside 20 percent of their income annually a total of 52 years to save the required funds,” she says. “Fraser Valley and the Greater Toronto real estate markets round out the steepest three, requiring median-income households to come up with 70 percent and 63 percent of purchase prices of $823,300 and $802,400, respectively, requiring prospective buyers to save for 42 and 32 years, respectively.”
Top 5 Most Affordable Cities for Median Income Households
Hey, home buyers, just how stressed out are you these days?
Maybe you’ve finally come to grips with the crazy, sky’s-the-limit prices still sweeping through most major markets. Perhaps you’ve made peace with the ever-looming threat of another recession. Quite possibly you’ve even dismissed all that stuff about a coronavirus pandemic, and you’re blithely unconcerned about any aftershocks from the upcoming elections.
But when it comes to finding available homes on the market—where and when you want to buy ’em—well, that’s a challenge even the most battle-tested wannabe homeowners are struggling with these days.
And make no mistake: It is a battlefield out there. The problem is, there just aren’t enough homes on the market to satisfy all of the would-be buyers—and that causes prices to spike ever higher in many parts of the country.
Nationally, inventory plunged 13.6% in January compared with a year earlier, representing the biggest drop in more than four years. Few markets have been immune to the plunge. There are now 164,000 fewer homes on the market, the fewest number since 2012, when realtor.com® began collecting the data.
In some of the tightest markets, well-priced homes in the most sought-after locations can sell within a few hours of going up for sale. In others, there are enough properties for sale that buyers don’t need to make a split-second decision and can be choosier.
That’s why our economics team searched for the metropolitan areas where it’s easiest to buy a home—and where it’s not.
“Inventory is falling—even in the easiest markets to buy a home,” says realtor.com Chief Economist Danielle Hale. “For buyers, it means there are fewer options to choose from, they have to make quicker decisions when they’re out there shopping, and they’re probably also dealing with rising prices.”
And while this may sound like a bonanza for sellers, keep in mind that most of them are also in the market to buy a new home. So there’s that.
To come up with our findings, we looked at the number of listings per 1,000 homeowner-occupied households in the 100 largest metros in the fourth quarter of 2019. The analysis was based on the number of homes for sale relative to the local population. And we narrowed our findings to one per state for some geographic variety.
So where can buyers get a home without losing their mind, and where would they want to sign up for meditation and relaxation classes? Let’s dig into the findings—and the trends they’re showing.
At first blush, the metros with the most homes on the market may not seem like they have much in common. But many of the metros in this hodgepodge are in the South, a less expensive part of the U.S. long popular with retirees and second-home seekers. But many of the cities in our rankings have strong economies, drawing younger buyers as well.
You want to buy a home fast? Head to Florida!
Why does the Sunshine State dominate our list of easiest places to buy a house, when nationally the trends are going the other way? After all, on our unfiltered list, Florida takes six of the 20 spots with the highest inventories of homes on the market. (We limited our list to just one metro per state.)
Well, some of it is seasonal: Florida’s busy real estate season kicks off in the fall, when the Northerners and Midwesterners head south. Sunshine State sellers begin planting those “For Sale” signs in the yards and listing their homes in earnest toward the end of the year, unlike the rest of the country, which heats up in the spring and summer.
But it’s also a function of the fact that builders are currently stepping up new construction to meet the greater demands of a tsunami of retiring boomers.
Reasonably priced Cape Coral, a city with about 400 miles of canals on Florida’s southwestern coast making it popular with vacation home buyers and seniors, snagged our top spot. The area has been affected by recent hurricanes and toxic blue-green algae blooms in recent years, which may be why the area has a bit more inventory than other Florida destinations.
“It has a city-suburb feeling,” says longtime Cape Coral real estate agent Nelson Rua, of Coldwell Banker Residential Real Estate. “We have local mom and pop stores instead of big franchises, and geographically we’re very well-protected by the storms because we have these barrier islands in front of us.”
The metro’s median home list price was $325,050 in January, according to realtor.com data.
While Cape Coral inventory may seem high, at 37.9 properties per 1,000 households, it’s still falling compared with the previous year. And that’s something it has in common with all of the other Florida entries on our larger list (including Miami, Deltona, North Port, and Jacksonville). Lower mortgage interest rates have spurred more buyers to take the plunge, and inventory in Cape Coral actually plunged 22% year over year in January.
Starter and more affordable homes tend to go quick, while the more expensive ones can linger on the market, according to Brad O’Connor, chief economist of the Florida Realtors, the state’s Realtors association.
It’s just easier to find a home in beach and retirement destinations
For many of the same reasons as in Florida, it’s easier to find homes in beach and retirement destinations with strong economies, like Charleston, SC (No. 3), and Virginia Beach, VA (No. 4). South Carolina and Virginia are both tax-friendly states, appealing to those living on fixed incomes, and both have lots of good jobs and are more friendly toward builders.
Charleston has its port, Boeing and Volvo plants, and a thriving tourism industry driving the economy. And its old-world-style cobblestone streets, hanging moss, gorgeous architecture, and renowned food scene may be why buyers are coming up with the metro’s median list price of $422,500. (That’s about 29% more than the national median of $300,000.)
Real estate broker Randy Bazemore, of Century 21 Properties Plus, is seeing lots of 55-and-up buyers moving to the area as well as younger professionals working in the tech industry.
Meanwhile, Virginia Beach has one of the largest military presences in the nation with more than 86,000 active-duty personnel stationed in the area. The median list price there is $310,000.
For well-heeled retirees or second-home buyers, Honolulu (No. 10), with a median list price of $655,050, has plenty of options for sale.
Watch: The 4 Markets Where Homes Are Appreciating Fastest
New construction gives inventory a boost—at least in some places
Lack of new real estate construction in much of the country has been a big problem ever since the housing crash brought everything to a dead stop more than a decade ago. Finally things are picking up again—at least in those markets where permitting is easier, labor is cheaper, and plenty of land is available for builders to put up more homes.
Often, these places also have fewer regulations, which can hold up the process. That’s partly why Las Vegas (No. 5), Des Moines, IA (No, 8), and Houston (No. 9) made the list. Charleston, as well as many of the Florida metros, has also seen a lot of new construction.
In Des Moines, there’s new construction in the suburbs to the north and west of the city, says local associate broker Paul Walter of Re/Max Concepts. But there are also just more folks putting their existing homes up for sale. Those two reasons may be why the metro area saw a 3% bump in inventory, the only one in our top 10 to not be lower in inventory compared with the previous year.
“Homes not being underwater would be the big driver” in the increase in inventory, says Walter.
The other metros that made our top 10 were Bridgeport, CT, at No. 2. The city has more inventory as there’s less demand than in other parts of the country thanks to the state’s shaky economy and high taxes.
Get ready for a shocker: New York City came in at No. 6! That’s because its metro area is so enormous, there are homes for sale in the surrounding suburbs, exurbs, and smaller cities, including on Long Island and in upstate New York, Connecticut, New Jersey, and Pennsylvania.
Plus, while there’s basically no such thing as affordable homes for sale in Manhattan, there is a glut of luxury condos sitting on the market waiting for uber-rich buyers with millions of dollars to come around—$1.7 million studio condo, anyone?
OK, now let’s go to the dark side—the metros where you’ll have to jump on new listings the moment they hit your inbox. Get ready!
Buyers are having a tough time in tech cities
No surprise here: The tightest U.S. real estate markets are the ones with blazing hot job markets—and these days that usually means tech hubs. And these places often have pricey real estate to match their blazing economies. There’s a constant influx of new workers, all slugging it out for a very limited supply of housing.
Silicon Valley’s San Jose, CA, which had the fewest homes for sale, is also one of the most expensive markets in the country. There are just four, yes four, listings per 1,000 households. That kind of shortage explains why the median list price is just a hair under $1.1 million. If we hadn’t capped our ranking at just one metro per state, fellow astronomically pricey tech metropolis San Francisco would be close behind.
Unfortunately, not all tech workers make seven- or eight-figure salaries, causing them to search for homes farther and farther out from city centers—and their gigs.
But inventory is likely to rise, at least a little, in the coming months, says Patrick Carlisle, the chief market analyst for the San Francisco Bay Area for Compass. “This market takes a while to wake up from the holidays.”
Part of the problem is homeowners are staying in their properties longer so there isn’t much turnaround, says Carlisle. When they do move out, owners often rent out their properties and pocket the lucrative income instead of putting them on the market. And the lack of new construction is exacerbating the crunch. What is erected often skews luxury, well out of the price ranges of most buyers.
In Seattle, home of the online retailing giant Amazon.com—and No. 3 on our tightest inventory list—a simple equation is responsible for the lack of housing, according to Chris Bajuk, a local real estate agent at HomeStart Real Estate Associates.
“When people have good-paying jobs plus low interest rates, that’s fuel for the fire,” he says.
Plus, there’s not much available land for builders. The city and outlying suburbs are constrained by water, mountains, and zoning rules.
Other tech meccas on our list include Salt Lake City (No. 6), aka Silicon Slopes; Boston (No. 7), a financial, higher education, and tech center; and Washington, DC (No. 9). The real estate market in DC has exploded since Amazon announced it would be installing its second headquarters just outside of the nation’s capital, employing thousands of tech workers.
Inventory is drying up in the Rust Belt’s comeback cities
On the opposite side of the booming, ultraexpensive tech meccas are the Rust Belt cities in the Northeast and Midwest. Some of these urban meccas have been investing in their downtowns and staging comebacks, becoming more appealing to buyers and investors seeking affordable real estate without sacrificing amenities. And many folks want to get in while they still can afford to buy.
The one-time industrial hub of Buffalo, NY, which sits on the Canadian border near Niagara Falls, came in second place. If we didn’t cap our list at just one metro per state, nearby Rochester, NY, would have been next in our rankings.
Buffalo’s revitalization is attracting folks from other parts of the country, says associate real estate broker Ryan Connolly of Re/Max Plus. The Buffalo metro’s median list price was $197,950 in January—about a third less than the national median.
“We are seeing incredibly, incredibly low inventory levels,” says Connolly. The number of homes for sale fell 16% year over year in January, to 6.1 listings per 1,000 households. “It’s really frustrating for buyers.”
That’s leading to multiple offers and folks offering over the asking price on homes in good shape during the busy season. It’s so bad that about a year ago, he saw 23 offers come in on a three-bed, two-bath ranch home in a Buffalo suburb.
“It was a nice home, be we weren’t expecting that,” Connolly says.
Buyers are also clamoring for homes in Columbus, OH, which earned the fifth spot in our ranking. It’s the capital of Ohio and home to Ohio State University and its roughly 45,000 students—buoying it economically. But there simply aren’t enough homes to go around.
“When we had the recession, we didn’t build any new houses. [And] we’re still not building enough homes,” says real estate agent Jeff Cotner of Re/Max One in Pickerington, OH, a Columbus suburb. “The inventory shortage is not going to go anywhere for a while.”
As she entered third-year residency at University of Toronto medical school, Dr. Lorraine Jensen was on track to become an academic physician at Women’s College Hospital, an ambitious teaching facility that attracts some of the world’s best doctors.Her husband, Brian Wilson, a former Bay Street lawyer who worked for the Metrolinx transit agency at the time, was building a promising career in one of Canada’s highest-profile legal communities.
“I was very interested and involved in clinical teaching,” said Jensen. “I always wanted that to be part of my career.”
Those goals didn’t change when they had their first child, a boy named Colton, in 2014. But other priorities suddenly shifted into view.
Jensen and Wilson both grew up in small towns and began talking about where they wanted to raise their family. They agreed it wasn’t in the frenzied downtown of a big city, so in 2015 they left Toronto and moved to St. Catharines, a smaller centre in Ontario’s Niagara region.
“It was a long discussion,” said Jensen. “But Brian and I love the Niagara region … and it kind of checked all our boxes — career-wise for myself, and then also in terms of the community that we wanted to raise our children in.”
Jensen accepted a teaching position at the Niagara campus of McMaster University Medical School and also works as the site lead in general internal medicine at Niagara Health’s new state-of-the-art hospital in St. Catharines.
Wilson initially commuted to his job in Toronto — three-plus hours on a good day, four on a bad one — but later accepted his current role as legal counsel for Niagara’s regional government, which serves 12 local municipalities.
“My satisfaction with work and life increased dramatically,” he said. “And I don’t miss it.
“There’s a lot of big-city amenities with a small-town feel, so I don’t feel like we’re wanting for anything by not having that Toronto connection.”
This kind of story is increasingly common. Young families, tech entrepreneurs and mid-career professionals are moving to Niagara in large numbers, seeking an alternative to the harried and hectic life they find in larger centres.
“There’s a feeling of serenity out here,” said Stephanie Petroff, a realtor in Niagara-on-the-Lake who previously
worked in public relations at the LCBO head office in Toronto.
“When I come off the highway … it feels like my shoulders go down about three inches just because it’s a feeling that you are vacationing where you live.”
Niagara’s population is projected to rise by 40 per cent over the next two decades, thanks in part to its affordable real estate, excellent school systems, vibrant arts community and an alluring urban-rural mix that provides big-city amenities with small-town charm.
Last year the average house price was $413,700 — roughly half the cost of a typical home in Toronto, and less than the average Toronto condo. Niagara real estate is also a prime investment opportunity — the fifth-best market in Canada, according to MoneySense magazine.
World-class elementary and secondary schools are located throughout Niagara, and Brock University and Niagara College provide exceptional post-secondary education at the foot of the Niagara Escarpment, a UNESCO Biosphere Reserve.
St. Catharines also has a stellar rising culinary scene — young, urban and world-class — that complements Niagara’s renowned wineries, distilleries, craft breweries and fruit orchards.
The region also has some of North America’s least-congested roads. By the standards of any major city, rush hour simply doesn’t exist there.
“I love the fact that you can get anywhere in about 15 minutes,” said Lloyd Oliver, Petroff’s partner and a fellow Niagara-on-the-Lake realtor who previously worked at Maple Leaf Sports and Entertainment in corporate sales.
“Here you can just get in your car and go — whether it’s commuting to work, shopping, eating out or even crossing the border, everything is at your fingertips.”
Niagara-on-the-Lake is home to the world-renowned Shaw Festival theatre, and the Meridian Centre in St. Catharines is a 5,300-seat stadium with OHL hockey, minor-league basketball and big-name concerts.
Jerry Seinfeld, Elton John and John Mellencamp have performed there, and A-listers Adam Sandler, John Legend and Kelly Clarkson have played Fallsview Casino in Niagara Falls.
Niagara residents enjoy all the attractions tourists do — picking peaches or riding horses on summer afternoons, sipping cocktails at some of Canada’s best restaurants in the evening and watching Grammy-winning artists at night.
“It’s a great place to live,” said Dr. Lorraine Jensen. “It’s a fantastic place to raise a young family, and from a medical perspective, it’s very feasible to meet your career goals here.”
“Do it,” added the lawyer Brian Wilson, urging others to put down roots in Niagara. “You won’t regret it … it’s a great place to live, work and play. People shouldn’t think twice.”
Ninety-two percent of Canadians see at least one barrier to home ownership, and two of the top concerns are related to the mortgage process, according to a recent survey from Zillow and Ipsos.
Canadians report feeling pressured by stricter mortgage regulations that went into effect in 2018 and Zillow’s survey found that 56% of Canadians see qualifying for a mortgage as a barrier to home ownership—a six-point increase from 2018. This concern rises to 64% for consumers who recently purchased a home, likely linked to the impending mortgage regulation changes at the time of their home search.
New and stricter mortgage requirements took effect in January 2018 with the addition of a stress test, requiring borrowers to qualify under a higher rate. The rule only applies to newly originated mortgages and is designed to prevent borrowers from taking on more debt than they can handle if interest rates go up. Since its passing, buyers’ worries are growing according to the survey. Half of Canadians (51%) say they are specifically concerned that stricter rules will prevent them from qualifying for a mortgage, up five points since 2018.
Steve Garganis, lead mortgage planner with Mortgage Architects in Mississauga, said that the concerns have risen due to more information flowing to consumers.
“Canadians are surprised to learn that even a large down payment won’t guarantee you a mortgage approval. Got 30%, 40%, 50%, 60% down payment and great credit? Guess what? You still may not qualify for a mortgage. This is ridiculous, in my opinion,” Garganis said. “Those of us with years of experience in risk mitigation and credit adjudication know that if you have a large down payment, the chances of default are slim and none. Chances of any loss to the lender is nil.”
Younger home shoppers also feel the weight of the law. Sixty-nine percent of younger home shoppers, those between 18-34 years old, are concerned about qualifying for a mortgage under the stricter guidelines. This worry is also present for current renters who may be considering the purchase of their first home: 66% express concerns about mortgage qualification under stricter guidelines.
Garganis added that more Canadians are being forced back to the six big banks, as smaller lenders now have more costs in raising funds to lend. This results in Canadians paying more than they should.
Most people have heard the buzz word “stress test” but don’t really know what it means or know the specifics of what it did, said Jeff Evans, mortgage broker with Canada Innovative Financial in Richmond, B.C. He thinks that the higher qualifying standard is “quite unreasonable,” and that the government has “taken a hatchet to anything to do with helping the average Canadian to own a home.”
Evans says that Canadians have a right to be concerned, although there’s no sign of their concerns hampering their desire to purchase a home.
“Life has gone on. They qualify for less, the market has gone down primarily because of the changes the government has made, so it’s starting to get more affordable again and people are gradually coming into the market as it becomes more affordable, “Evans said.
Other perceived barriers to home ownership include coming up with a down payment (66%), debt (56%), lack of job security (47%), property taxes (46%), not being in a position to settle down (15%), or not being enough homes for sale (13%). Only 8% of Canadians claim not to see any barriers to owning a home.
Source: Mortgage Broker News – by Kimberly Greene10th January, 2020
A third of Canadians should probably move closer to work
Choosing a dream home often comes with compromises and that can include accepting a longer commute to work.
But it seems that the daily journey to work is a cause of stress for many Canadians; 35% have told a new survey by recruiter Robert Half that their commute is stressful.
In addition, 36% said that their journey to and from work is too long with the average return journey taking 53 minutes of their day. More than a quarter of respondents spend more than an hour on their commute.
“A professional’s commute often sets the tone for their day. Dealing with a lengthy or frustrating trip to the office can have long-term effects on employee morale, performance and retention,” said David King, senior district president for Robert Half. “As workforces become more dispersed, organizations need to proactively offer solutions to help address and alleviate commuter stress, while keeping business priorities on track.”
While living closer to work can be a solution, a move towards less expensive neighbourhoods often means a trade off between the type and size of home desired and a longer commute.
However, the rise of flexible working is helping to ease the pressure, while changing the shape of modern workplaces.
Ultimately, companies that provide support to help workers get more out of their lives, both at and outside the office, cultivate better focused, motivated and more loyal teams,” added King.
One of the biggest hurdles land lease communities face is a lack of awareness Canadians may have about this housing option. Many do not understand how the arrangement works. Surprisingly, two in three Canadians are unaware that land lease is even a home-ownership alternative. Here are some frequently asked questions about land lease home-ownership, and answers that correct the myths.
1. What happens when your lease is up?
Some people mistakenly think that their lease could change dramatically, or worse, they could lose their home. At end-of-lease term, a homeowner can either renew their lease or continue on a monthly basis. If someone sells, it just starts a new lease. “We must follow the provisions set by the Residential Housing Act and Planning Act, which means increases and changes to the lease are governed by law,” says Robert Voigt, director of planning for Parkbridge. “Leases are typically 21 years in length, and depending on the project, we have mechanisms for creating longer-term leases. Our main focus is to work collaboratively with residents within the legal framework.”
2. Does the value of your home rise like freehold homes?
Homes in land lease communities go up in price the same way as other homes on the market. “In our experience, if you have a well-maintained home in Parkbridge, it will appreciate in value the same as freehold homes do in the same market,” says Voigt. “Homeowners sell their homes using real estate agents with support from the Parkbridge property team. As an example, our records show that for homeowners in the Antrim Glen community near Hamilton, well-maintained homes have experienced an average seven-per-cent increase in value per year over the past decade.”
3. Are people in land lease homes typically lower income?
“While perception may be that residents are lower income, in reality, they have simply chosen to leverage the equity in their home for the lifestyle they want to live or enter the housing market,” explains Voigt. They’re just looking for ways to make their money go the furthest and get more living space for less.
4. Does the 21-year lease make it difficult to get a mortgage? Since most mortgages have a 25- or 30-year amortization, the 21-year lease for most land lease homes could require adjustments. “You may have to have a shorter amortization period based on your lease, which will mean higher monthly payments, but your home would be paid off more quickly,” says Voigt. “And it could still be less money than you’d spend monthly for a freehold home of equal value.” Parkbridge is working with financial institutions to support financing options.
5. Is it difficult to sell a land-lease home?
Not at all, says Voigt. “Homes go up at the same rate as freehold homes in the same area. If the home is well looked after, you should have no trouble selling it at a similar rate of return as any other house in your community.”
6. Is the community closed off from the larger neighbourhood?
These are not gated communities. “They are built to the same quality and look like other houses, streets and park areas in the broader local community,” explains Voigt.
The FTHBI is here. Learn how it can save you money on your first home purchase.
By Kara KuryllowiczSeptember 5, 2019
For the first time in years, Canada’s first-time buyers have a reason to feel optimistic. September 2, 2019, marked the launch of the Canadian Mortgage and Housing Corporation’s all-new First-Time Home Buyers Incentive (FTHBI), a financial incentive designed to help middle-class Canadians buy their first property.
The Perfect Time for the FTHBI
The timing for the FTHBI couldn’t be better. Beyond the First-Time Home Buyer Incentive itself, there are three key real estate factors that actually favour all buyers as we head into 2019, not just first-timers. Fixed mortgage rates remain at an all-time low. Most markets across the country are balanced or even a little soft. And maybe best of all (and as discussed in this recent Fall Trends article) buyers typically don’t buy homes in the lead-up to a federal election, giving first-time buyers some added leverage as markets slow before October 21.
“The First Time Home Buyer Incentive will reduce the monthly mortgage for your first home by up to $286,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for Canada Mortgage and Housing Corporation. “This will help up to 100,000 families across Canada to buy their first home.”
How Does the FTHBI Work?
In effect, the FTHBI reduces their monthly mortgage payment without increasing the amount they need to save for the down payment. First-time buyers can finance a portion of their purchase through a form of shared equity mortgage with the Government of Canada. Home buyers will still have to pass the B-20 stress test and have mortgage pre-approval and mortgage approval.
“No doubt, some first-time buyers will benefit, and we’ll have to wait and see just how many families it affects,” says Paul Taylor, President and CEO, Mortgage Professionals Canada, Toronto.
Who Qualifies for the FTHBI
A combined household income of less than $120,000
The insured mortgage and incentive cannot be more than four times the participants’ qualified annual household income
Incentive is 5% on a resale or existing home
Incentive can be either 5% or 10% on a newly constructed home
No payments are due on the incentive until the home is sold or at 25 years
The incentive can be repaid in full at any time without penalties (repayment must be in a lump sum of the current % valuation of the home.)
The incentive must be repaid after 25 years, or when the property is sold, whichever comes first
At 25 years, or resale, the homeowner repays 5 or 10% of the home’s value at that time rather than the amount received from CMHC (if the home lost value, the owner and CMHC share the loss and conversely, both parties benefit if the home increased in value)
For years now, unaffordable, astronomical properties have been getting all of the attention. In reality, those homes co-exist with some reasonably-priced, affordable homes in the very same cities, including Toronto, Montreal and Vancouver. Of course, those homes may be smaller apartments, older homes and/or in less desirable neighbourhoods, but they’re out there and may be perfectly suited to first-time buyers and their families.
The Financial Impact of the FTHBI
“CMBA is in favor of the FTHBI because by sharing equity with the government, first-time home buyers in specific segments are able to reduce the cash required for their weekly or monthly payments,” says Vancouver-based Rob Regan-Pollock, senior mortgage broker, Invis Inc., and co-chair of the Canadian Mortgage Brokers Association. “It’s another tool in the quiver for mortgage brokers and agents that are helping first-time home buyers earning less than $120,000 annually get into markets where they can purchase a home for under $500,000.”
Let’s look at the financial impact the FTHBI would have on a family buying a $200,000 and a $500,000 home. With a 5% or $10,000 ($20,000 total with FTHBI) down payment on a $200,000 home, the buyers will save $114 a month or $1,372 a year. If they put $25,000 down ($50,000 with FTHBI) on a $500,000 home, they’ll reduce their monthly payments by $286 a month or $3,430 annually.
Now that you know exactly how the FTHBI could help you achieve your dream of home ownership, you can start planning your future to take advantage of the upcoming federal election, the staggeringly low fixed rate interest and softer markets in various regions of Canada.
Source: REW.ca – By Kara KuryllowiczSeptember 5, 2019
When it comes to real estate, one of the most common questions is: when is the best time to buy? The typical response is the best time to buy was yesterday and the second best time is today. That response is a bit clichéd as many homebuyers have heard it before and it doesn’t provide any practical advice.
Buying a home will likely be the largest purchase people make in their lives which is why they want to be as informed as possible when making their decisions. It’s impossible to predict where the markets are headed, but there are some scenarios where it makes sense to get into the market.
Early in the year
Historically, real estate sales slowdown at the start of the year. This happens because many people aren’t exactly excited to go out in the winter to search for a new home. Although there’s usually less inventory available during this season, there’s an opportunity for buyers since sellers may be more motivated to negotiate on price to complete the sale.
When interest rates are low
Over the last couple of years, interest rates in Canada have been at near record lows. In 2018, when the Canadian economy was doing well, the Bank of Canada increased interest rates three times from 1% to the current rate of 1.75%. The economy has since cooled and a recent poll found that many economists expect rates to remain flat until the end of 2020.
In the first half of 2020, we’ve seen mortgage rates fluctuate both up and down. In early 2019, 30-year fixed mortgage interest rates rose to between 4.5% and 5.0%. However, right now, we’re seeing rates as low as 2.54% which can be very appealing to potential and current homeowners.
When your financial situation is optimal
Buying a home is a goal for many Canadians, but it’s easier to make that a reality if your financial situation is in good standing. Ideally, you should have a secure income, good credit score, no or limited debt, and a healthy down payment.
By having all of the above, lenders are more likely to approve you for a mortgage in the amount you’re looking for. That’s not to say that lenders will ignore potential homeowners who have debt or are on a single income, it just means that they may not be extended as much money.
When inventories are high
Real estate is cyclical and things can change fast. A seller’s market can quickly become a buyer’s market if a lot of homes are up for sale. Generally speaking, spring and summer are when listings are at their peak, but there’s also an increased amount of buyers so that doesn’t automatically mean buyers will get a deal.
The highest month for home-for-sale inventories is May, followed by April and June which lines up perfectly for potential homeowners who are looking to move in by Labour Day. If there are more homes for sale compared to buyers, then sellers will need to ensure their home is priced competitively so they can get it off the market.
When the economy is doing well
Although interest rates may rise when the economy is doing well, it may still be a good time to buy a home. Those looking to buy who have been pre-approved for a mortgage may not feel the effects of any increased rates and they may be able to take advantage of new market conditions.
With an increased economy, there may be more construction of new homes which means more inventory for potential homeowners to choose from. This scenario also helps current homeowners who are looking to move up on the property ladder since they’ll likely have an easier time selling their current home before buying a new one.
The pros and cons of buying real estate
The above factors are all good reasons to start looking for a home but note that homeownership isn’t for everyone. If you’re looking to enter the real estate market, it’s important to look at the pros and cons early so you know what you’re getting into.
As a homeowner, you can choose what to do with your home
Over time, you build equity in your home
You may be able to generate income from your home by renting it out (or a portion of it)
There are some tax benefits e.g. tax deductions on mortgage interest
As a homeowner, you’re responsible for all the maintenance and repairs
There’s limited flexibility if you need to relocate quickly
A huge part of your net worth is locked into your home which makes it difficult to diversify
There are additional expenses that renters don’t have such as property tax and repairs
As you can see, deciding on when is a good time to get into the real estate market depends on quite a few things. There’s never an ideal time, but you can look at the current market conditions as well as your own financial situation and then decide if you’re ready to become a homeowner.
Source: Equitable Bank – Joe Flor Director, National Sales
Equitable Bank is a major lender partner to the mortgage broker network and offers mortgage products to meet almost every client need. To find out more call us at 905-813-4354 or stop by our office for a chat.
In Toronto, you need more than $160,000 to buy a house; meanwhile, in Regina, the most affordable city, you only need $70,000
Canadians looking for a home in major cities will likely have to look elsewhere, unless they count themselves among the country’s richest.
New analysis from RateSupermarket.ca shows that only those in the top income bracket can afford to buy homes in many of Canada’s major cities like Toronto, Vancouver and Montreal.
It cites a recent study from Zoocasa, a Canadian real estate website, which places the benchmark prices for Toronto at $873,100 and Vancouver at $1,441,000. Only the top 10 per cent can afford to live in Toronto and only the top 1 per cent can live in Vancouver.
Jacob Black, managing editor of RateSupermarket.ca, had this advice for potential homeowners: “Step one is to have a realistic idea of what you can spend. Step two is look outside the box that you might have looked in before,” said Black. “We’ve seen a trend develop in terms of cohabitation, multi-family homes, looking at options like condos, smaller apartments outside of the major city area.”
The RateSupermarket analysis compares these benchmark prices against the household income needed in order to afford a home in 12 Canadian cities, including Victoria, Hamilton, Kitchener-Waterloo, Calgary, Ottawa-Gatineau, London, Edmonton, Saskatoon and Regina.
RateSupermarket’s criteria for determining household income was to assume a 3.25 per cent five-year fixed mortgage rate, $10,000 in debt, a monthly lease vehicle payment of $300, a down payment of 20 per cent, and amortization of 25 years.
Using these figures, one’s household income in Vancouver would need to be above $240,000 in order to afford a home. In Toronto, a household would need more than $160,000.
A surprising result for Black was the difference between Toronto and Hamilton — a city that’s 70 kilometres away, which requires a more ‘reasonable’ $120,000 household income for a $630,000 home.
“I think that really highlights that there are opportunities in thriving vibrant areas,” said Black. “It’s just not necessarily in the same traditional areas you’ve been looking in or that you’d be expecting.”
This seemingly insurmountable unaffordability applies to starter homes as well. With these homes in Vancouver, only income earners in the top 25 per cent can afford them. The benchmark unit price is $656,900. Toronto is not far behind at $522,300.
Above all else, Black stresses a wise use of resources when it comes to the property market.
“I don’t see (the market) reversing. I don’t see a correction, but I think it’s important people do what they can with the resources they’ve got,” said Black.
Regina emerged as the most affordable city in the study, with a benchmark price of a home of $275,900 and a minimum household income of $70,000.
Here’s the full list:
Vancouver: House price: $1,441,000. Household income needed: $240,000
Toronto: House price: $873,100. Household income needed: $160,000
Victoria: House price: $741,000. Household income needed: $140,000
Hamilton: House price: $630,000. Household income needed: $120,000
Kitchener-Waterloo: House price: $523,720. Household income needed: $110,000
Calgary: House price: $467,600. Household income needed: $100,000.
Ottawa-Gatineau: House price: $444,500. Household income needed: $90,000
London: House price: $426,236. Household income needed: $90,000
Montreal: House price: $375,000. Household income needed: $80,000
Edmonton: House price: $372,100. Household income needed: $80,000
Saskatoon: House price: $301,900. Household income needed: $70,000
Regina: House price: $275,900. Household income needed: $70,000
The recent slump in real estate sales and prices in Canada has led some to question whether housing remains a good investment. For immigrant families in Canada, the stakes may be particularly high.
That’s because new research from Statistics Canada shows that investment in housing by immigrant families has been a major factor in helping them plug the wealth gap that exists between them and their Canadian-born compatriots.
Whereas the study found wealth growth for Canadian-born families has in recent years been driven both by increases in housing and registered pension plan assets, for immigrant families, housing alone has been the primary driver of wealth growth.
René Morissette, a senior economist with Statistics Canada, in a report released this week used data from several waves of the Survey of Financial Security to compare the wealth growth of immigrant and Canadian-born families. The designation of a family being immigrant or otherwise was based on the immigration status of the major income earner.
The report generated synthetic cohorts in order to compare similarly structured immigrant and Canadian-born families over time. The benchmark cohort comprised recent immigrant families whose primary income earner in 1999 was 25 to 44 years old and had been in Canada for fewer than 10 years. The other cohort comprised established immigrant families whose primary income earner in 2016 was 42 to 61 years old (on average 17 years older relative to 1999) and had been in Canada for 18 to 26 years. The comparable Canadian-born cohorts were of the same relative age groups.
Interestingly, while immigrant families started at lower rates of home ownership in 1999, by 2016 the homeownership rates between comparable immigrant and Canadian-born families converged.
On average, 31 per cent of the benchmark cohort of recent immigrant families in 1999 owned a principal residence compared to 56 per cent of comparable Canadian-born families. By 2016, established immigrant families led by a primary earner of 42 to 61 years of age reported a homeownership rate of 78.7 per cent compared to 74 per cent for their Canadian-born counterparts.
A key finding of the report is how the immigrant families caught up to their Canadian-born counterparts in growing wealth over time. In 1999, the median wealth of Canadian-born families with the major income earner aged 25 to 44 years old was 3.25 times higher than that of comparable recent immigrant families. However, when the two synthetic cohorts were compared 17 years later, the difference in median wealth between the immigrant and Canadian-born families almost disappeared.
Canadian-born and immigrant families relied on different asset classes for wealth growth. The wealth composition of families in 2016 revealed that housing equity explained about one-third of the average wealth of Canadian-born families. By comparison, housing equity was responsible for a much larger share of immigrant families’ wealth, accounting for anywhere between one-half to two-thirds.
The wealth growth observed for immigrant families has a side story of high indebtedness. The report found that in 2016, immigrant families, in general, had “markedly higher debt-to-income ratios than their Canadian-born counterparts.”
Immigrant families often, but not always, are larger in size. This is partly because immigrants are more likely to live in multi-generational households or to have siblings and their respective families occupy the same dwelling.
The unit of analysis in Statistics Canada’s report is economic family, which “consists of a group of two or more people who live in the same dwelling and are related to each other by blood, marriage, common law or adoption.” An economic family may comprise of more than one census family.
The expected differences in family size and structure between immigrants and Canadian-born families could have influenced some findings in the report. For example, the family wealth held in housing by immigrant families might lose its significance when wealth growth is compared at a per capita basis.
Housing is more than just an asset class. Homeownership provides shelter and the opportunity to grow equity over time. Canadian data shows that rising home prices over the past two decades has helped immigrants bridge the wealth gap even when the gap between the average incomes of immigrants and Canadian-born has persisted.
Source; The Financial Post – Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.