Canadians Give Housing Market the Thumbs-Up

Warnings about a housing market on the verge of a U.S.-style meltdown may sell newspapers, but if consumer confidence is any indication, the Canadian housing market is just fine.

According to the 2013 Annual State of the Residential Mortgage Market in Canada report by the Canadian Association of Accredited Mortgage Professionals (CAAMP), mortgage-holders felt comfortable with their mortgage debt last year, seeing it as “good” versus “bad” debt.

“Consumer confidence in the mortgage market remains high, especially among people who have owned homes for a longer period,” said Jim Murphy, president and CEO of CAAMP, in a release on the report. “Consumers are paying off their mortgages faster, selecting five-year, fixed-term rates, and agreeing that real estate is a good long-term investment.”

Consumer confidence is so strong, in fact, that fewer than 10 percent of Canadians expect a housing bubble burst.

In one aspect of the report, survey participants were asked to predict changes in housing values over the next five years. While many experts expect rocky times, more than half of the consumers surveyed anticipate a fairly stable environment, with prices that are flat or increase slightly. Only a small group of respondents felt that prices would increase rapidly.

Provincial differences

Of course, the resale housing market in 2013 differed across Canada: Nationally, sales were down by 5 percent, and only three provinces beat the 5 percent level – Alberta, with an 11.3 percent increase, New Brunswick, which dropped by 2.3 percent, and Manitoba, which experienced a 3.3 percent decline.

What’s also interesting is that older Canadians are more likely to predict stability; younger people are more wary, expecting that a housing bubble burst is a possibility.

Still, wariness is not stopping property virgins from diving into the Canadian housing market. Last year, 57 percent of home purchases were made by first-time buyers. Those buyers join the ranks of the now 9.52 million homeowners in Canada.

Seniors Take On Debt to Help Their Kids Buy Homes

Retired Canadians are finally enjoying the fruits of their labours. Or are they? According to statistics, people over 65 are piling on debt just as other age groups are paying it down. And one contributing factor may be the number of seniors gifting or loaning down payments to their children.

A report by rating agency Equifax Canada Inc. noted that average consumer debt for the 65+ group increased by 6.5 percent in 2013, ahead of all other age groups.

In a Financial Post article, Nadim Abdo, vice-president of consulting and analytical services at Equifax, says: “I think what’s happening is people 65-plus are taking this on mostly to help their kids.”

Experts suggest it’s partly thanks to low interest rates; with home equity loans at record lows, seniors are taking advantage and their kids are benefitting.

It’s understandable, as Jim Yih points out in the Edmonton Journal: “With high real estate prices and tighter mortgage lending rules, it can be tough for first-time homebuyers to get into the market. Many new homebuyers look to parents for help, and many boomers and soon-to-be retirees are quick to help out by offering the down payment.”

Unfortunately, if parents need to tap their investment in an emergency, they can’t “just pull the money out of the home as they would with an investment like a mutual fund,” says the Parental Guide: Buying a Home for Your Child. So they go further into debt…and become statistics.

Likely not what their debt-conscious children had in mind.