Despite the havoc COVID-19 has wrought upon the economy, the dream of homeownership remains unmoved.
In fact, more Canadians are now interested in purchasing a home compared to before the pandemic, according to datareleased recently by Mortgage Professionals Canada (MPC).
Among those currently renting, a full 14% say they intend to buy a home within the next 12 months, double the figure reported at the end of 2019 (7%).
Similarly, the percentage of renters who said they would never purchase a house fell dramatically, from 32% at the end of 2019 to 14% now.
Current homeowners, too, are increasingly looking to purchase. The study found 9% of current homeowners intend to purchase a home in the next 12 months, up from 7% reported at the end of 2019.
Of course, Will Dunning, chief economist at MPC, cautions that intentions can differ from actual actions.
“Some people, when they research their options, may decide not to buy,” he said. “Or, they might discover that because of the mortgage stress tests, they would be unable to obtain the financing they would require.”
What’s Driving the Desire to Own a Home?
There are several reasons why interest in homeownership has increased since the start of the pandemic. Here are a few of them…
1. Desire for More Space
Given the new experience of lockdowns and social distancing, a growing number of people are wanting more space. And if more space isn’t possible, they at least want home living quarters that meet all of their needs.
“It is possible that the evolving emergency has caused more non-owners to decide that they want to buy homes, for example, to move out of an apartment building, where social distancing is challenging, to a lower-density environment,” Dunning said.
2. Historically Low Interest Rates
With fixed rates for many mortgage terms now falling near the psychological 2% barrier, more people are deciding this is a good time to buy.
“Lower interestrates are making ownership more affordable,” Dunning noted.
Twelve percent of renters and 10% of current owners cited low interest rates as a reason for their desire to purchase.
And it’s no wonder. Consider that a rate below 2.80%, for someone with a 25-year amortization, is the point where more than half of your mortgage payments are going towards principal repayment. With a rate near 2%, many buyers will have the opportunity to accumulate substantial equity during a five-year term.
Not only that, but previous MPC surveys have found buyers tend to always anticipate interest rate increases. In this survey, however, the expectation for interest rate increases “might be the lowest ever recorded by this survey,” Dunning noted.
3. Fear of Missing Out, or “FOMO”
While there’s less data to support this hypothesis, anytime prices start rising rapidly—as they seem to be once again—first-time buyers typically feel pressured to jump into the market before prices run away from them.
This started happening at the beginning of the year, particularly in the Greater Toronto Area, where prices jumped 8.5% compared to January 2019.
Now, after a pause during the height of the pandemic this spring, prices are picking up where they left off, according to the latest housing data. Home prices soared 10% in the GTA last month and 14.3% nationally, the Canadian Real Estate Association reported.
This is surely factoring into the homebuying decisions of many first-time buyers who are debating whether or not now is the time to jump into the market. And judging by home sales activity last month, which is now back above pre-pandemic levels, many are choosing not to wait.
If you are in the same boat and want to understand your financing options, now is a great time to set up a consultation with a mortgage broker.