By Luann Lasalle, The Canadian Press

MONTREAL - Younger Canadians are expected to lead the way with home buying this year as they take advantage of low interest rates, new jobs and what they consider “good prices,” a bank survey says.

The survey for the Royal Bank suggested that 15 per cent of Canadians between the ages of 18 and 24 were very likely to buy, almost double from eight per cent in 2009.

It’s a marked shift in the attitudes of younger Canadians, who have tightened their budgets over the past few years to cope with tough jobs markets and the recession.

“Our poll found that 35 per cent of younger Canadians, between the ages of 18 and 24, are intending to buy a home due to good real estate prices,” Marcia Moffat, RBC’s head of home equity financing in Toronto, said Monday.

The national average price for a home was $328,537 in January, according to the Canadian Real Estate Association.

Thirty-one per cent of 18 to 24-year-olds surveyed in the online poll said they would buy a house because of a new job. The survey also found 22 per cent in that young age group wanted to buy a home because they considered interest rates were good.

CIBC World Markets senior economist Benjamin Tal said more young people are getting into the real estate market, taking advantage of low interest rates, lower down payments and more years to pay off their mortgages.

Tal said he estimates the young people getting into the market as a bit older, between the ages of 22 and 28.

“Basically parents are begging their kids to buy now because they remember when they were paying 12 to 15 per cent mortgage interest,” Tal said.

“So there’s a sense of urgency to get into the market and young people are a part of it.”

Tal described the coming real estate market of the next three or four years as “boring.”

“I think that what we are doing now is that we are basically stealing activity from the future.”

The RBC survey also suggested that overall attitudes are changing as more Canadians return to shopping for homes as the economy recovers, even though it’s considered a seller’s market.

“Confidence in the housing market is back, essentially,” RBC senior economist Robert Hogue said.

Royal Bank said the study found more Canadians are “very likely” to buy a new home in the next two years.

Ten per cent of the 2,047 people of all ages surveyed for the study said they planned to buy a home within two years - up from seven per cent two years ago.

The RBC study also found that 91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years.

“At this stage last year, there was doom and gloom all around and it definitely affected the housing market,” Hogue said.

One-quarter of those surveyed, 26 per cent, said they expect their home to be their primary source of income when they retire.

However, the surge in optimism doesn’t necessarily mean that Canadians have forgotten about past economic troubles.

The survey found they are still more cautious when it comes to mortgages. Forty-four per cent of those surveyed who plan to buy a home in the next two years said they would take a fixed-rate mortgage.

Also on Monday, the latest new homes numbers showed that the annual rate of housing starts were up in February.

The Canada Mortgage and Housing Corp. said that the seasonally adjusted annual rate of housing starts reached 196,700 units in February, an increase from 185,400 in January 2010.

Senior CMHC economist Bill Clark said the market is seeing a lot of “catch-up” and consumers in Ontario and B.C. are likely trying to avoid the harmonized sales tax before the summer.

“So if you roll all of that together it’s really sort of one big recipe for housing starts to go up,” Clark said.

The report showed the gain was concentrated in the multiple starts segment, particularly in Toronto.

Urban starts increased nine per cent to 179,100 units in February.

Urban multiple starts increased by 19.1 per cent to 89,900 units, while single urban starts increased by 0.5 per cent to 89,200 units.

The annual rate of urban starts increased 28.6 per cent in Ontario in February, 14.3 per cent in Atlantic Canada, 10.8 per cent in the Prairies and by eight per cent in British Columbia.

In Quebec, urban starts fell 14.1 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 17,600 units in February.

There has been much talk of the ‘housing-bubble’ of late and so I thought this article from Sunny Freeman for The Canadian Press would be of great interest to you……
TORONTO — Record home sales last month are based on low supply and high demand and are more likely to drop off this year than inflate a housing bubble that could threaten a fragile recovery, economists say.

A Canadian Real Estate Association report released Friday said December and the 2009 fourth quarter were the best periods on record for home re-sales, while prices also rose sharply from their year-earlier levels.

Meanwhile, strong demand continued to deplete the number of homes for sale and the estimated 5.6 months it would take to sell a house through the Multiple Listing Service in December was less than half the 12.3 months it would have taken a year earlier.

The number of total listings fell 22 per cent in December from the same 2008 period and 12.6 per cent for the year. The imbalance in supply and demand drove the national average price of homes to $337,410 in December, 19 per cent higher than in December 2008, but slightly lower than the 2009 average of $348,840.
Douglas Porter, deputy chief economist at BMO Capital Markets said while high prices caused by strong demand and weak supply could pose a risk to the fragile recovery, he is not willing to jump on the “bubble bandwagon” yet. A bubble occurs when prices increase without any sound underlying fundamentals, he explained, and that’s not the case in Canada’s housing market, which is closely tied to changing interest rates and economic fundamentals.

“We still do have a relatively tight supply situation and exceptionally low interest rates and a mild recovery in the economy, so there are a lot of good reasons why home prices are rising.”

“What we’re seeing is almost textbook recovery,” he said. “The speed of the recovery is mind-boggling, the fact that housing is leading the recovery is really not a surprise… it’s exactly what you’d expect to happen.”
Finance Minister Jim Flaherty said Friday he does not see a housing bubble yet, but he noted the government has many tools at its disposal — from raising down payment requirements on insured mortgages, to lowering amortization periods and urging the banks to be more cautious in their lending — to prevent such a thing from happening. “We don’t want to have a group of house purchasers who purchased houses now at insured mortgages at relatively low rates who would not be able to manage them if rates were to increase later on,” Flaherty said in an interview with Business News Network, a cable TV business channel in Toronto.

“I’ve looked at the numbers with CMHC,” he added. “We’re monitoring it. I do not see evidence of a bubble right now, but we’re going to keep watching it. There are some steps we can take that we will take if it’s necessary.”
The association said 27,744 units were sold across Canada in December, up 72 per cent from the same month in 2008. The year-earlier period saw the lowest sales in a decade in the wake of a global credit crunch and the start of the recession in Canada.

Please click on the link, below, in order to access the full report.

CMHC Fall Housing Market Outlook

Record 18.2% jump

Alia McMullen And Garry Marr, Financial Post

Canada’s housing market boomed in July as low interest rates and improving economic confidence sent sales of existing homes to a record for the month, despite generally weak economic conditions.

The remarkable turnaround from an almost frozen market at the start of the year has economists stunned, and while they predict activity will level out soon, the risk is continued low interest rates begin to stoke a house price bubble.

“We can’t rule it out,” Douglas Porter, the deputy chief economist at BMO Capital Markets, said of the possibility of a bubble. But he said the scenario was hard to fathom given the underlying weakness in the economy.

Even so, that weakness to date has not prevented a strong rebound in the existing housing market, which declined steadily throughout 2008 and hit a decade low in January.

Home resales increased by 18.2% in July compared with a year earlier, to reach 50,270 units — the highest July sales result on record, Canadian Real Estate Association figures showed yesterday. At this pace, the housing market is on track to be even hotter than it was in 2007, which was a record year. Seasonally adjusted sales have risen for six straight months to be up 61.2% since January and are now just 1.4% below the peak in May 2007.

But despite the spectacular gain, the level of activity in the first seven months of this year remains 6% lower than in 2008 when activity had already begun to decline. Mr. Porter said some of the rise in the month was a result of sales that had been held back from the start of the year because of the weak market conditions.

But homebuyers have swarmed back into the market because of low interest rates and more affordable house prices.

“Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher,” said Dale Ripplinger, the president of CREA.

A five-year fixed-rate mortgage, the most popular product among consumers, is still available for under 4% at some financial institutions. Variable-rate mortgages, tied to prime, remain in the 3% range and are not expected to rise until June. The Bank of Canada has promised to keep the benchmark interest rate at a record low 0.25% until mid-2010, provided inflation does not begin to rise.

The strength in the market has been felt right across the country. Vancouver sales last were up 90% from a year ago, while sales climbed 28% in Toronto and 28% in Edmonton. The strong demand in the country’s highest-priced markets has to some degree skewed the average price higher. The average price of a home sold on the Multiple Listing Service last month rose 7.6% from a year earlier to $326,832.

The strength in the resales market has not been echoed in the price of new homes, which fell 3.3% in June compared with a year earlier, Statistics Canada figures showed Wednesday.

Part of the pressure on prices has come from a decline in supply, which has fallen for seven straight months. New listings in July were down 13% from a year earlier to 73,444.

Economists are skeptical the housing market will be able to continue to post such strong growth.

“After improving markedly, affordability will deteriorate in coming quarters, and unemployment will continue to rise,” said Pascal Gauthier, an economist at TD Bank Financial Group. “New listings might well start rising again too. Combined, a larger supply and a softening in demand should cool prices in a delayed fashion.”

Robyn Adamache, senior market analyst for CHMC (Canadian Mortgage and Housing Corporation), presented us with the 2009 Housing Market Outlook.  Please click on the link below to view the presentation:

CMHC 2009 Housing Market Outlook

Click on the link below for an excellent summary of why the Canadian housing mortgage market is very stable and in better shape than our neighbours in the US.

Canadian Housing Mortgage Market Summary