Getting A Foot In The Door

With the options for some first-time homebuyers growing more restricted, buyers are waiting a little longer or spending a little more to find the home of their dreams.

According to a new report from BMO, first time homebuyers in Calgary were more willing to increase their budget than anywhere else in Canada with 54 per cent of Calgarians prepared to spend more. As a result, buyers are also expanding their search to include a greater range of properties.

“High prices in a few major cities, and the fact that prices are outrunning incomes in Toronto, are turning off some first-time buyers while forcing others to go deeper into debt, tap their parents for hefty down payments and opt for a condo rather than a detached house,” said Sal Guatieri, Senior Economist, BMO Capital Markets.

In Calgary, the benchmark price for a single-family home has climbed 9.1 per cent over the last year increasing to $482,800 in February. The rise in prices has been accompanied by a decline in the number of entry level single family homes up for grabs. Year to date, single-family homes priced under $300,000 represent three per cent of all new listings, while the $300,000 to $399,000 range represents 19.42 per cent of the market. For reference, at this time last year, 7.6 per cent of single-family listings were below $300,000 and 23 per cent were in the $300,000 to $399,000 range.

“Ultimately this means there is far less choice for single-family product in the lower price ranges,” said CREB® Chief Economist Anne-Marie Lurie. “However, consumers still have options in the condominium markets and surrounding areas, and based of sales growth figures those looking for affordable product are turning to these sectors which have recorded some improvement in new listings.”

The report from BMO showed buyers in Calgary had an average budget of $363,400 for their first home. This sits higher than the national average of $316,100, but far below the prices paid by first-time buyers in Vancouver and Toronto, where the average first home cost $506,500 and $408,300 respectively. With prices increasing and product limited, 50 per cent of the first-time buyers in Calgary said their purchase had been delayed, which was less than the national average of 60 per cent.

In order to realize their goal of homeownership, the report showed buyers were more willing to look to their parents for assistance with 30 per cent of Calgary first-time buyers expecting to get help from parents or relatives.

When purchasing her first home at the age of 20, Casey Irving did so with the help of her parents co-signing a loan.

“I decided to purchase a home because it was a better investment, instead of paying rent or going to [university] residence, to buy a home and have people pay me for rent.”

While being the most willing to increase the amount they spent on a home, Calgarians were also the most likely to decrease to other expenditures in order to get the home they wanted. According to BMO, 68 per cent of first-time buyers in Calgary made spending cutbacks in order to save for a home. On average, Calgary buyers put down 16.8 per cent towards the cost of their first home as a down payment, which was slightly higher than the national average of 16 per cent.

“Among the many considerations for those trying to get a foot in the door of the real estate market for the first time, the most important of all is building a substantial down payment,” said Laura Parsons, mortgage expert, BMO Bank of Montreal. “Buying a home is one of the most important financial decisions one can make, and typically represents the largest form of savings for Canadian households. It’s crucial that those planning to buy are well prepared and have considered all options available to them.”

In considering all options, Calgary buyers have increasingly turned towards the condo market as a point of entry. Contrasting the limited listings found in the entry-level singledetached home market, new listings for condo apartments priced below $300,000 represent nearly 54 per cent of all the new listings this year. Add in the $400,000 category and the number jumps to 78 per cent of the market.

“Consumers who are in the market for single family homes priced below $300,000 do not have many options, and when product does become available, it typically does not stay on the market for long,” said CREB® President Bill Kirk. “However, 54 per cent of the new condominium apartment listings this year are priced below $300,000, which is providing options for consumers looking for affordable product.”

In February, RBC’s Housing Affordability report ranked Calgary’s condo market, and the city’s market as a whole, amongst the most affordable in Canada. According to the measure, the standard detached bungalow would require the average Calgarian to part with 33 per cent of their household income ($90,600), while purchasing a standard two-storey would take up 33.6 per cent of the qualifying income of $92,200. The average condo would require just 19.4 per cent of the qualifying household income, which RBC puts at $53,300.

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