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Canadian Housing Dream Becomes More Elusive for Majority, New Study Reveals

High Interest Rates and Economic Fears Influence Homebuying Decisions
Rising housing costs and economic uncertainty have created a challenging path to homeownership in Canada, making it appear less attainable for 68% of Canadians than for their parents' generation, according to a recent comprehensive study.

TORONTO, June 5, 2023 – A recent report on Canadian homeownership patterns exposes a concerning trend – for many, the dream of owning a home appears more out of reach than it was for their parents’ generation. The study reveals that 68% of Canadians are planning to wait until mortgage rates drop before purchasing a home. This outlook is most prevalent among younger generations, with 71% of Gen Z (ages 18 to 24), and 69% of younger Millennials (ages 25 to 34) sharing this sentiment.

As the Canadian housing market gradually recovers from a slow start in 2023, with home prices firming and existing home sales increasing by 11.3% in April, housing affordability remains a pressing issue. A combination of past price gains and higher mortgage rates has pushed housing affordability to its most challenging level in over three decades.

Rising Housing Costs and Economic Uncertainty Make Homeownership Less Attainable

The report highlights how Canadians’ perceptions of the economy have influenced their homebuying decisions. Fears of market uncertainty and volatility, concerns about the economy, and financial anxiety due to rising housing costs and unknown expenses have led to deferred homebuying decisions and a preference to wait for mortgage rates to drop before refinancing or purchasing homes.

The study also sheds light on the different financing strategies Canadians intend to use for their home purchase. Half of the respondents plan on using personal savings, 41% plan on using loans from their financial institutions or lines of credit, and 19% are expecting financial gifts and loans from family, friends, and others. Additionally, 46% are planning to use Canada’s assistance programs, including the First-Time Home Buyers Incentive and the Home Buyers’ Plan.

Waiting for Mortgage Rate Drops – The New Norm in Canada’s Housing Market

The latest State of the Housing Market report released by Mortgage Professionals Canada (MPC) supports these findings. The report reveals that Canada’s housing market has undergone a dramatic shift since mid-2022, with home prices down and interest rates up significantly. This shift has resulted in an increase in Canadians’ anxiety about inflation and their family’s finances.

Despite the challenging conditions, demand for homeownership remains strong. A significant number of respondents see real estate as a good long-term investment. Many first-time homebuyers expressed willingness to work with mortgage brokers to navigate the complexities of their first significant investment.

The panel of industry experts recently assembled at the Empire Club of Canada shared their insights and potential solutions to the country’s housing supply crunch. They noted the need for an additional 3.5 million housing units by 2030, a goal that currently seems unrealistic due to record immigration and housing construction that’s failing to keep pace with demand. They stressed the need for provincial governments to set feasible goals given the current labor pool and building industry capacity.

The survey and panel insights underscore the urgency of addressing housing affordability in Canada. As the country grapples with high household debt, inflated home prices, and fluctuating mortgage rates.

Quick Facts – Exploring the Road to Homeownership in Canada

  1. Personal Savings: 52% of Canadians plan to use personal savings for their home purchase.
  2. Loans and Credit Lines: 41% plan on using loans from their bank or lines of credit to finance their home purchase.
  3. Family Assistance: 19% of Canadians expect financial help, such as gifts and loans from family, friends and others.
  4. Home Buyer Programs: 46% intend to use Canada’s assistance programs. Specifically, 32% plan to use the First-Time Home Buyers Incentive, and 16% the Home Buyers’ Plan.
  5. The Waiting Game: 68% are planning to wait until mortgage rates drop to buy a home, with 26% stating that current rates have influenced their decision to move. In light of market volatility, 18% are holding off on their decision.
  6. Deferred Decisions: 51% are deferring home purchases due to economic concerns. Additionally, 18% plan on waiting until 2024 or later, while 20% are unsure when or if they will buy a home.
  7. Revisiting Refinancing: 69% plan to wait for lower mortgage rates before refinancing their homes.
  8. Financial Anxiety: Housing costs, fears of unforeseen expenses, and overall financial worries are the top sources of financial anxiety, affecting 71%, 83%, and 81% of Canadians respectively.

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