Number of People Intending to Buy Homes Sees Biggest Drop in 20 Years
What’s being touted by some as “disappointing,” may actually be a sign that buyers today are willing to hold out, either for lower prices, or for a time when the market seems more favourable to them.
Recent results from an RBC survey show that only 15 per cent of those surveyed plan to purchase a home within the next 2 years. That’s not many Canadians out in the housing market, and it’s remarkably down from the 27 per cent that the same survey showed in 2012. That decline is so remarkable in fact, it’s the sharpest drop the survey has seen in its 20 years of existence.
So, what are the reasons for it?
The biggest reason anyone will tell you, is because of the tighter mortgage rules that went into effect last July. Those rules made it much harder for buyers to get mortgages, and near impossible to get mortgages that don’t come with hefty mortgage insurance fees. And while it’s been widely known that these rules are the reason for the cooling of so many different markets, the RBC survey proves it. 4 out of 10 respondents said that these new rules, mainly the limits on amortization periods, were the reason they were putting off their purchase.
Unfortunately, not all sellers have dropped their prices to meet that cooling demand. Buyers know that this will happen in time, and they’re willing to wait those sellers out. 46 per cent of the survey’s respondents cited unaffordability as the main reason that they weren’t purchasing a home within the next 2 years. The average home price in Canada right now sits around $368,895; and that’s pennies compared to what you’ll find in major markets such as Toronto.
Then there are the buyers on the other end of the spectrum – those who don’t want to buy because of the fear that housing values, and therefore prices, will drop. This is the most disastrous effect that could come from any housing bubble, and is what was seen in the U.S. in 2008. Fortunately for these buyers, there’s nothing to fear. While prices will drop slightly, it won’t be anything significant, nor a sign of disaster to come. More likely, it will be a positive sign that the market is simply correcting itself.
In addition to what the housing market is doing, many are also putting off the purchase of a home because of uncertainty in the job market. 28 per cent of survey respondents said that they were concerned about their job security and therefore, their future ability to repay a mortgage. And so, this group is also delaying the purchase of their home.
Where do you fall within the survey results? Are you considering purchasing a home? Are you going to do so any time within the next two years? What are your reasons for doing so, or not?