Aspiring buyers delay home purchases: BMO

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This article was published 01/05/2024 (868 days ago), so information in it may no longer be current.

Two-thirds of aspiring homebuyers in the Prairie region are delaying their purchase decisions, waiting for interest rates to drop before considering homeownership, according to a new BMO survey.

The survey said 66 per cent of aspiring homebuyers in the Prairies, encompassing Saskatchewan and Manitoba, are holding off on purchasing a home, while 68 per cent expressed worries about the cost of living and 62 per cent about inflation.

BMO’s Real Financial Progress Index also found more than 40 per cent of current homeowners considering refinancing are awaiting mortgage rate adjustments before proceeding.

BMO regional president Paul Seipp said homeownership remains a major focus for younger people.

“Over the past three months, these concerns have intensified, especially regarding housing costs,” Seipp told the Sun in a phone interview. “Despite these anxieties, homeownership remains a significant financial milestone for today’s Millennials and Gen Z community members, who aspire to own homes.”

It’s important to note that despite anticipated rate cuts in the second half of the year, rates still have a way to go before affordability aligns with recent norms, Seipp said.

He admitted the decision to purchase or wait on homeownership is personal and contingent upon individual financial circumstances, but noted there are encouraging factors in the Prairies.

“Homeownership in the region remains relatively more affordable compared to other parts of Canada,” he said. “Prospective buyers in the Prairies can utilize various tools such as first home savings accounts, budgeting, and pre-approval processes to enhance affordability and mitigate surprises on the path to homeownership.”

BMO senior economist Robert Kavcic also cautioned that affordability relief may take longer to materialize.

“Rates still have a long way to go before affordability is restored to recent norms,” Kavcic said.

The survey also revealed that despite economic optimism, concerns about financial situations and housing costs persist among Prairie residents.

A significant majority — 85 per cent — believe they are making real financial progress, yet uncertainties loom over factors such as home insurance costs and overall financial stability.

“Top economic and environmental concerns impacting homebuying decisions include climate-related factors such as wildfires, floods, heat waves and storms,” Kavcic said. “Moreover, rising home insurance costs are expected to influence homeowners’ ability to maintain or purchase homes.”

Regarding specific areas within Manitoba for potential homebuyers to consider, Seipp noted Winnipeg and Brandon are experiencing significant momentum in the housing market.

“Winnipeg and Brandon are promising areas where homeownership is favoured over alternative locations,” he added. “Affordability is a key factor in Manitoba, making the decision between renting and buying more feasible. The cities are currently the areas showing the most momentum in Manitoba, although at a slower pace compared to markets like Calgary and Edmonton.”

For homeowners contemplating refinancing, he said, it’s essential to assess their overall debt situation and consider options such as debt consolidation to improve cash flow, Seipp said, adding they should evaluate the overall cost of homeownership, including factors like rising home insurance costs, to make informed decisions about when and how to refinance.

“There’s a noticeable reliance on financial support from parents, particularly among Gen Z and Millennials,” Seipp said. “While there’s a slight increase in expectations for financial assistance, it’s important to recognize that parental support may not be as readily available due to their financial constraints.”

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