Waiting it out: is it worth holding off on home buying plans?

Mortgage rates may come down, but will home prices goes up?

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Many potential buyers in Canada’s housing market are putting off buying a home in the near future as higher borrowing costs and prices have put the home they want out of reach, a new survey suggests.

“When you combine higher prices with higher interest rates, it’s a double-whammy for many prospective buyers’ ability to afford a home,” says Lauren Haw, the Toronto-based broker of record for Zoocasa, a national realty firm that published the report this month.

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As a result, the survey of 1,600 Canadians found among those considering buying a home, 69 per cent had delayed their purchase.

Among millennials, the number fell to 67 per cent. Haw notes one reason for the possible drop is many have already purchased a home, pointing to recent Statistics Canada data that found about 56 per cent of millennials are homeowners already.

Among generation Z, or adults ages 30 and younger, 70 per cent of respondents indicated they had delayed buying.

As well, 69 per cent of generation X and 46 per cent of baby boomers — who had been thinking of buying — had put that intention on pause. Yet Haw notes that these two groups make up a much smaller share of buyers.

Even among millennials who already own, many who may be looking to move-up buy are having second thoughts, Haw says.

“Those who bought the condo or a small house a few years ago are now likely delaying moving into a larger home because of higher costs.”

Demand among the demographic remains high, especially for renters. Here, the study found 81 per cent of renters have delayed buying a home with 50 per cent of renters being millennials, Haw adds.

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The survey also found that high prices and higher borrowing costs accounted for about 60 per cent of respondents’ reasons for delaying their purchase. The high cost of living, an inability to sell their current home, and a lack of choice were among the lesser reasons for delaying a purchase.

Younger buyers in the city are “taking a little more time,” says Calgary realtor Mark Neustaedter with EXP Realty.

“Some younger buyers we are working with are holding off until interest rates start to go down.”

Yet he often advises them that if they are able to purchase now, it may be more advantageous to do so.

“There is a misconception that affordability will improve, but I feel the opposite will be true when rates come down,” Neustaedter says, noting more people will seek to buy, pushing up prices even faster.

Already, the Calgary market has seen prices reach record highs in the face of rising interest rates. Calgary Real Estate Board statistics from September show the benchmark price of a home increased nearly nine per cent year over year to reach a record $570,300.

What’s more, the city’s resale market has achieved new, respective monthly highs for sales since May.

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That is in contrast to much of the rest of Canada where demand is flattening or falling, Haw adds.

“Many other major markets, especially in Ontario and British Columbia, are also seeing inventory rise.”

By comparison, Calgary’s market inventory in September fell nearly 25 per cent.

While sales and prices should slow at some point, Haw notes that a growing population and strong economy will still fuel housing demand not just in Calgary but other markets, too.

“That should sustain prices if not help them to grow,” Haw adds. “But I think we’re at a point where people are wondering who can afford homes at higher prices?”

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