First-time homebuyers are being lured into the real-estate market by falling prices, lower interest rates, more selection and new government incentives, a new report shows. The ReMax real estate company said preliminary figures show sales were up in February, after a terrible January, driven by more first-time buyers entering the market.
The report comes alongside new Statistics Canada figures showing the first year-over-year decrease in new-home prices in more than a decade.
ReMax said lower prices and record low lending rates are prompting many first time buyers to "get off the fence, out of the rental, and into the market."
"While a sense of caution still prevails, more and more first-timers are finding it hard to pass up the chance to become homeowners in today's buyer-centric real-estate climate," ReMax said in its report released Wednesday.
"Buyers are clearly in control in most Canadian markets."
Wendell Collier said he and his girlfriend have finally waded into the market in Toronto after waiting it out for years.
"There is less pressure now," said Collier. "There are no bidding wars, you see houses sitting on the market a lot longer. It's a buyer's market again."
Collier also said low interest rates have been an incentive.
"You start saying 'Okay, now it's looking very possible.' Before we would have handled it, but we would have been stretched thin for a couple of years. Now we can have our cake and eat it too."
After years of renting, Tyler Backus recently bought his first house in the Haldimand-Norfolk region of Ontario, inspired by falling prices and the new federal renovation tax credit.
"It seemed that everything was going down in price and it was the right time to buy," said Backus.
Ottawa recently announced new tax credits of up to $1,350 for homebuyers to renovate their house or cottage. It also increased the amount first-time homebuyers can withdraw from their RRSPs from $20,000 to $25,000, and implemented a tax credit for first-timers of up to $750 to help cover closing costs.
ReMax said 22 of the 32 markets in the survey, or 69 per cent, "remain firmly in buyer's market territory."
Some of these spots include Vancouver and Victoria, Edmonton and Calgary, Saskatoon and Regina, Ottawa and Toronto, and Halifax.
Cities such as Winnipeg, Kitchener-Waterloo, Ont., Sudbury, Ont. St. John's, N.L., and Charlottetown had what ReMax called "more balanced conditions" between buyers and sellers.
It said 40 per cent of the 32 markets had single-detached homes priced under $200,000.
The most affordable markets for detached homes, based on starting prices were Moncton, N.B. in Eastern Canada at $115,000, Windsor at $75,000 in Ontario and Winnipeg at $185,000 in Western Canada.
In its report released Wednesday, StatsCan said new home prices fell 0.8 per cent in January compared with the same month a year earlier.
It was the first year-over-year decrease across the country since January 1997, led by a steep drop in Western Canada.
New home prices in Edmonton fell the most by 10.4 per cent, followed by a 6.5 per cent drop in Calgary, 4.2 per cent drop in Victoria and 3.2 per cent dip in Vancouver.
Regina was the rare Western Canadian city that saw a large increase in new home prices, a lift of 21.7 per cent. Only St. John's, N.L. saw new home prices rise more, by 24.1 per cent in January compared to the same month in 2008.
Earlier this week, Canada Mortgage and Housing Corp. said housing starts fell for the sixth straight month in February, down 12.3 per cent to a seasonally adjusted annual rate of 134,600 units. That's after falling 10.9 per cent in January.
February's figures are a 30 per cent drop from the same period last year, and were lower than most economists expected
Scotiabank economist Adrienne Warren said new home sales respond to what happens in the larger resale market, which has seen a reversal in recent months after nearly a decade of constant growth.
Resale home activity fell 37.3 per cent across Canada in January compared to the same time last year, while average prices fell 11.3 per cent. National figures for February are due in the coming days.
Warren said early indications are that February sales activity has picked up compared to a dismal January, but she predicts a turnaround will not be quick.
Housing sales will continue to be weak this year and there will be "a sluggish recovery" starting in 2010, she said. That's because a lot of buyers are still concerned about losing their jobs in the current recession.
As for first-time home buyers, Warren said they can be an indicator of a market recovery.
"In any recovery you need to have first-time buyers because other buyers are just shuffling around housing. For a buyer than wants to move up, you need that first-time buyer to come in and buy from them," Warren said.
Vancouver real-estate agent Shelly Smee said she has a handful of clients who are preparing to move up in the market now that house prices have fallen in Canada's most expensive city. She said some couples are looking at moving out of their condominiums and into a house.
"Some people are thinking now is a good time to move up and they can finally afford it," Smee said.
Smee also said some clients have also built up equity in their homes in recent years and are now considering upgrading thanks to record-low borrowing rates.
Interest rates have fallen dramatically in recent months as the central banks and federal government seek to ease the credit conditions in order to jump-start the flagging economy.
Last week, the Bank of Canada did its part by dropping the overnight rate down to an unheard of half per cent. Canada's chartered banks then lowered their prime rate to 2.5 per cent and having been lowering other lending rates including mortgages.
In the areas I am selling in York Region, North York, Thorhill and Richmond Hill it is the best time to buy a home. We have not seen interest rates this low for many years. You are able to take advantage of the Sutton Mortgage Advantage of a 5 year fixed mortgage for just 3.5%. We have not seen prices of properties this low in some time so the market is perfect for you. For those looking to see better prices might not want to sit on the fence longer. In some areas we have already begun to see prices increase.
For more information on buying or selling a home please call Judi Kohn,Royal LePage Your Community Realty at 905 731-2000or email firstname.lastname@example.org.