Affordable mortgages will be the key component in a slowing real estate market. In comments to the Globe and Mail, TD Bank economist, observed that, “Affordability was steadily eroded during the house price surge of late 2009 and early 2010, with carrying costs on a standard mortgage on an average priced home rising relative to average household incomes.” He asserts that “current levels(s) of household debt” combined with “tightened standards for mortgage insurance . . . has necessarily slowed homebuying.”
BMO deputy chief economist, Douglas Porter, one of the deans of Bay Street economists, meanwhile notes that, “While the softening in sales is very real, we continue to view it as a giveback (a big giveback, admittedly) to the surge in sales in the first half of the year.”
Mr. Porter attributes the softening of what may be – for now – a bought-out market to the effect that “earlier warnings that interest rates would rise and the coming of the harmonized sales tax in B.C. and Ontario” had in boosting sales in the first half of 2010. However, “with rates still low, and the labour market still sturdy,” Mr. Porter, “does not expect a marked decline (in home prices) going forward.”
“The main message” of the slowdown in sales activity, according to Mr. Porter, “is that anybody who wanted to buy this year bought in the first half of the year.”
With the drop in sales and prices – particularly in B.C. and Ontario – contrarian first-time homebuyers who did not rush to the registry office to make their purchase in 2010’s peak sales season may now be in a position to capitalize on a buyer’s market while mortgage rates continue to hover, at least for now, at near record lows. Working with a well-resourced and knowledgeable mortgage broker to secure your first home loan may further enhance the affordability of the home deals now on the market.
