RBC Housing Survey: Buyers Cautious

April 3, 2013

A RBC spring market for the housing market for 2013 revealed a not too encouraging outlook for the industry:

Only 15% of prospective home buyers polled said they are likely to buy a home in the next two years. That’s down from 27% in 2012. It’s the largest drop in prospective home buyers ever in the 20-year history of RBC’s home ownership survey.

The four main reasons for the drop in people interested to buy are:

  1. Stricter Mortgage Rules.  Almost 40% of the prospective home buyers said that the shorter amortization period limits their ability to purchase a home. Changes to the mortgage rules last year, especially the amortization reduction from 30 to 25 years on high-ratio mortgages has the greatest impact. 
  2. Fear of Overpaying.  Market psychology is affected by media headline like  “The housing bubble has burst, and few will emerge unscathed.” Negative media reports have a major impact affecting buyer psychology. Many buyers will put off their decisions to buy as they fear home prices may tumble. 
  3. High Prices.  Over a third said finding the modest 5% minimum down payment is a problem for them to consider home ownership any easier. Home prices are still high in relation to income and the ability of home buyers to afford their mortgages.  46% of the first time home buyers cited un-affordability as a top reason for not buying.
  4. Job Insecurity.  Close to one-third buyers in the survey (up from 20% in last year’s poll) said job security is a big concern for them not contemplate buying in the next 1 to 2 years.

If the spring housing market turns out to be sluggish in spite of low rates, and inventories keep building, 2013 and 2014 might turn bearish for Canadian’s housing market.

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