Kristine Owram, THE CANADIAN PRESS
TORONTO - Low mortgage rates and more affordable homes in many markets are pushing first-time home buyers to enter the market in droves, Canadian real-estate experts say.
Phil Soper, president and chief executive of Brookfield Real Estate Services (TSX:BRE.UN), said that when the Canadian housing market was hot, bidding wars forced many buyers to put in offers without conditions to increase their chances of being accepted.
This, combined with unprecedented increases in home prices in many parts of the country, scared many first-time buyers out of the market, he said.
"When first-time buyers stop entering the market it's like sand in the gears of the housing market," said Soper, speaking Tuesday at a BMO conference on the current and future state of Canada's housing market.
But he said the economic downturn changed all that. As housing prices fell across the country and lenders lowered their mortgage rates to attract borrowers, the market became much more attractive to people looking to buy their first homes.
"The uptick in first-time home buyer purchases across the country is quite astonishing," Soper said. "Affordability in places like Vancouver has improved for the first time in a very long time."
BMO senior economist Sal Guatieri said the average mortgage payment has fallen by one-third or $600 a month from its peak, while average resale home prices have fallen 14 per cent from highs seen in mid-2007.
Guatieri said he expects resale prices to fall "moderately further" this year for a cumulative decline in prices of approximately 20 per cent, but he said the slump in prices is slowing as buyers respond to renewed affordability in the market.
"We look for the housing market to correct further this year but not crash," Guatieri said.
Brad Lamb of Toronto-based Brad J. Lamb Realty Inc. said sales in March through the industry's Multiple Listing Service fell by only seven per cent year-over-year, compared to drops of 45 to 55 per cent in previous months.
And the average time it took to sell a home in Toronto dropped from 45 days in February to 39 days in March, he added.
"There's a fair amount of evidence out there that the market has bottomed and is starting to come back," Lamb said, adding that while prices may not fall any further, they probably won't rise in the near-term either.
Donald Lawby, president and chief operating officer of Century 21 Canada, agreed that now is a good time to buy a first home, but said prospective buyers should make sure they understand their local market before they dive in.
Soper said that while "we're well through this correction," the U.S. housing slump is far from over and will continue to affect Canadian home prices.
He added that a shortage of buyers in most parts of the country means that this is a bad time to be a speculator trying to make money off rising home prices.
"I don't see a sharp recovery in home prices over the next 24 months," Soper said. "I think home prices will rise at a snail-like pace."
* Article first appeared on April 14, 2009.