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First-time homebuyers catch a break with slowing home price growth

First-time homebuyers catch a break with slowing home price growth

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First-time homebuyers catch a break with slowing home price growth

We have some good news and we have some bad news, prospective homebuyers in Canada.

First, the bad news: According to the latest Royal LePage House Price Survey, home price growth in many of Canada’s real estate markets is slowing. This means, if you’re looking to buy a home, its value may not grow as much as it has recently. The good news, however, is that this same slowing price growth presents a window of opportunity for first-time homebuyers to get while you can.

The price of a home in Canada increased just 2.7 per cent year-over-year to $621,575 in the first quarter of 2019, Royal LePage says, well below the long-term norm of approximately five per cent. When broken out by housing type, the median price of a two-storey home rose 2.6 per cent year-over-year to $729,553, while the median price of a bungalow rose 1.1 per cent to $513,497. Condominiums remained the fastest growing housing type, rising 5.4 per cent year-over-year to $447,260.

Looking ahead to the second quarter, Royal LePage expects national home prices to stay relatively flat throughout the 2019 spring market, with the national aggregate price of a home increasing just one per cent over the next three months. Meanwhile, the housing markets in several larger Canadian cities have shown noticeable signs of slowing, with nearly half of the regions in Royal LePage’s Quarterly Forecast anticipating quarter-over-quarter price declines.

But these are national numbers, and as we’ve written before, there really is no such thing as a Canadian housing market.

But more on this later.

Silver lining

Early in 2018, Canada experienced the most significant housing correction since the 2008 financial crisis. Markets showed signs of recovery late in the year, yet the figures for early 2019 suggest that the market has once again slowed.

We are expecting this to be a sluggish year overall in Canada’s residential real estate market, with the hangover from the 2018 market correction and weaker economic growth acting as a drag on home price appreciation, balanced by lower for longer interest rates,” says Phil Soper, president and CEO, Royal LePage. “There is a silver lining here. This slowdown gives buyers, and first-time buyers in particular, an opportunity to buy real estate in our country’s largest cities.”

In the federal budget tabled by Finance Minister Bill Morneau in March, the Canadian government announced three new or enhanced housing programs. The First-Time Home Buyer Incentive is a three-year, $1.25-billion shared equity mortgage program whereby  Canada Mortgage and Housing Corp. (CMHC) will co-invest up to five per cent of the purchase price of an existing home. Further, for the first time in a decade, there was an increase in the registered retirement savings plan withdrawal limits in the Home Buyers Plan. The increase, from $25,000 to $35,000, was the largest since the program’s inception in 1992. Finally, an additional $10 billion in financing over nine years was earmarked for the construction of purpose-built rental housing.

Real estate is local

Illustrating our point that real estate is local and not national, the GTA housing market is still showing healthy growth.

“The city of Toronto is still one of Canada’s fastest appreciating real estate markets,” says Soper. “Detached home prices are rising in line with inflation, but condominium prices are increasing at near double-digit levels as vertical living has become the primary new-build option in this growing, world-class city.”

Median home prices in Toronto rose 5.8 per cent year-over-year in the first quarter of 2019. Two-storey home prices and bungalow home prices rose 4.8 per cent and 2.5 per cent year-over-year, respectively, while condo prices rose 9.3 per cent year-over-year. The overall GTA’s aggregate home price rose 3.4 per cent over the same period.

Real estate values in Ontario’s Greater Golden Horseshoe region continued to appreciate at a brisk clip, as local economies grew and workers from the GTA looked to trade commuting time for lower house prices. Niagara-St. Catharines, Hamilton and Kitchener-Waterloo-Cambridge aggregate prices were up by 6.9 per cent, 6.3 per cent and 8.9 per cent, respectively.


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Tips for First-Time Homeowners

Tips for First-Time Homeowners

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Tips for First-Time Homeowners

How have your dream of home ownership come true

Buying a home is one of the biggest decisions and commitments in your life. But personal finance experts warn that home buyers, especially first-time buyers, need to research, plan and save for their new home in order to realize their dreams of home ownership.

“Buying a home is very exciting but you have to do your homework first. Don’t just look at how much your mortgage payment will be. Make sure you factor in future expenses such as repairs, maintenance, property taxes, utilities and possible commuting costs when making the decision to buy a new home,” says Wade Stayzer, Vice President of Retail at Meridian, Ontario’s largest credit union. “You might be able to afford $1,200 a month for rent, but with the additional costs of owning a home you might not be able to afford a $1,200 mortgage, due to the additional costs associated with home ownership.”

Meridian offers tips and advice that will help you become a successful home owner.

Save up for a down payment: Saving up a significant down payment is extremely important, as it will help to cut down mortgage payments going forward. You should save up at least five per cent of the price of the home for a down payment.

Calculate your initial costs:  Besides your down payment, you have to factor in closing costs, moving costs, lawyer fees and taxes. So you aren’t surprised later, the general rule of thumb is to add 1.5-2% of the total purchase price to cover closing costs.

Meridian - Tips for First-Time Homeowners

Get pre-approved: Work with a trusted mortgage specialist to make your first home-buying experience easy and well planned. When getting pre-approved, make sure that you are accounting for all your monthly expenses, such as childcare, commuting costs and contributing to a savings account. Life has a way of changing at just the wrong time – it is good to have some financial wiggle room for unexpected events.

Know your options:  It’s important to know that a first-time home buyer includes anyone who has not owned a home in the past seven years. The Canadian government is currently offering a First-Time Home Buyer Tax Credit, up to $750, which you can later put towards a mortgage payment. It also allows first-time home buyers to borrow up to $25,000 from their Registered Retirement Savings Plans tax-free to fund their purchase.

Shop around: Different financial institutions offer different solutions so find the mortgage that is right for you. Make sure that your mortgage is flexible and you understand what you are getting.  As the saying goes, if it sounds too good to be true, it probably is. If someone is offering you a very low mortgage rate it may be because the service charges on it are enormous or that the mortgage is completely closed and you will be locked in until it matures.

Tips for First-Time Homeowners

For more information visit meridiancu.ca



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