Forget the recession; one look at the housing market and it's like we never had one. House prices are on the rise and they're not going to get cheaper anytime soon as buyers pile in to take advantage of low interest rates.
A recent
report by Royal Bank of Canada found that buying a house became slightly less affordable at the end of 2009 and that was entirely due to higher prices because the other things that affect affordability -- mortgage costs and personal income -- were better.
The overall slip in affordability wasn't huge, we're talking a 0.3% rise in the index that tracks the affordability of a standard two-storey home, but economists expect costs to get worse as the year unfolds.
So what should you do if you're planning on buying a home?
The good news for those who want to buy a house now is that affordability is still better than it was a year ago, but it is not expected to stay that way long because at present the demand to buy is higher than the desire to sell, which is why prices are climbing.
The reason demand is high is simple: people understandably want to take advantage of low mortgage rates before they start increasing again, something that economists think will happen in the second half of this year. RBC senior economist Robert Hogue says demand is likely high in Ontario and B.C. because many home buyers want to jump in before the HST is introduced on July 1, creating an increase in home-buying transaction costs.
Some buyers may also be trying to jump into the market before the Federal Government's mortgage changes take effect in April. The new measures require higher deposits, a move designed to prevent a U.S.-style sub-prime mortgage crisis, whereby people might struggle to repay their loans as interest rates inevitably rise.
This all means that house price growth may slow (not fall) in the second half of the year as the rush in demand eases, but affordability is not expected to get any better because by then interest rates should be on the rise.
"The anticipated and gradual rise in interest rates indicates that affordability is likely to gradually get worse as rates return to normal levels," says Hogue.
So if you are in the market for a new home, it looks like the sooner you buy the more affordable your purchase will be. However, if you do need to hold off, don't despair. Affordability is getting worse, but not at a crazy rate. Conditions should remain relatively affordable over the next year.
The survey shows that Vancouver remains Canada's least affordable city, followed by Toronto, Ottawa, Montreal, Calgary and Edmonton.
http://xml.channel.aol.com/xmlpublisher/fetch.v2.xml?option=expand_relative_urls&dataUrlNodes=uiConfig,feedConfig,entry&id=856242&pid=856241&uts=1269016402
http://cdn.channel.aol.com/cs_feed_v1_6/csfeedwrapper.swf
12 'Don't Miss' Factors for Home Buyers
Noise: Loud parties, teens with no curfews, your subdivision's late-night cut-through point, the whine of diesel engines from a nearby highway … these are few of your least favourite things. Can you hear the late-night fast-food orders coming from the drive-through lane on that main artery a block away?
iStock
Getty Images North America
12 Dont Miss Factors for Home Buyers
Noise: Loud parties, teens with no curfews, your subdivision's late-night cut-through point, the whine of diesel engines from a nearby highway … these are few of your least favourite things. Can you hear the late-night fast-food orders coming from the drive-through lane on that main artery a block away?
12 Dont Miss Factors for Home Buyers
Environmental issues: Sick-house syndrome, sometimes caused by hidden mold or odourless radon gas, can be vexing and render a house uninhabitable. Radon measurement professionals usually are listed in the Yellow Pages. Also, check for the proximity of power lines to your house.
12 Dont Miss Factors for Home Buyers
Odours: Phew! What is that sulfur smell? Odours from nearby manufacturing or waste-processing plants may not have been obvious when the wind was blowing in a different direction. Visit the neighbourhood on several different days to get a broader representation.
12 Dont Miss Factors for Home Buyers
Night lights: An unnoticeable phenomenon during daylight. Will the lights from an adjacent street, business or church cast a spotlight on your bedroom window at midnight? Is there adequate lighting to make you feel safe at night?
12 Dont Miss Factors for Home Buyers
Commute time:That suburban house is great, but will that unexpected extra half-hour commute consistently ruin your day? Time your drive to work before signing that contract.
12 Dont Miss Factors for Home Buyers
Crime stats: Police departments usually have crime data broken down by neighbourhoods. Some blocks seem to be magnets for car and home break-ins, drug dealing and other illicit activities. Are there houses in the neighbourhood that seem to attract a few too many nightly visitors? Do your homework.
12 Dont Miss Factors for Home Buyers
Schools: Just because you're buying into an upscale neighbourhood doesn't mean the public schools are desirable. You can get average test scores and ratings online and student-teacher ratios from the district. Consider attending a PTA meeting to talk with other parents about safety and gang issues.
12 Dont Miss Factors for Home Buyers
Transportation: Is there a mass transit stop in a short and safe walking distance? Do cabs readily serve your area? How quickly can you get to the nearest hospital or your doctor's office?
12 Dont Miss Factors for Home Buyers
Site survey: Make sure your property lines are accurate. The title company won't always catch discrepancies. In many cities, buying "updated" title insurance when buying a house has become a suggested standard. The reasonable fees for it are worthwhile because it covers issues that tend to cost people money, especially if you end up having to move a garage or a deck.
12 Dont Miss Factors for Home Buyers
Culture: Is there a neighbourhood association? If so, is that what you want? Is it overly strict? There will likely be dues to pay and some restrictions on roofing, street parking, house colour, landscaping or future additions you might plan. (Congratulations on your new triplets! Now hit the road.) The trade-offs are usually better home maintenance, code compliance and a better sense of neighbourhood unity and security. Also consider if the families on the block are reasonably consistent with your demographic and age groups. Will your kids have built-in friends?
12 Dont Miss Factors for Home Buyers
RSS Feed
Contact Us
