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This article was published 08/06/2024 (497 days ago), so information in it may no longer be current.

First-time buyers are an important lot.

Historically making up about half of all buyers in the market, according to Bank of Canada data, they provide demand at the low-end of the real estate market so current homeowners can move up to more pricey segments.

Yet the last two years, and arguably the pandemic, have proven challenging for young (or increasingly middle-aged) Canadians seeking to purchase that first home.

In many Canadian cities, including Winnipeg, the abode of choice has been the single-family detached home.

No home is more associated with the ‘Canadian dream’ than this ubiquitous — albeit increasingly costly housing type.

Yet as a starter home, amid the pandemic price run-up, and 18-month escalator of rising interest rates, the traditional ‘home’ is feeling increasingly out of reach.

A recent TD survey of prospective homeowners in Manitoba and Saskatchewan found nearly 70 per cent of respondents were not very confident they could purchase a home — of any type — in the next five years.

That’s leaving them stress (41 per cent), anxious (41 per cent) and frustrated (36 per cent).

Yet many are hopeful, says Steve Ng, mortgage specialist at TD in Vancouver, where the average single-family detached home price hovers at about $2 million, about five times that of Winnipeg’s at about $453,000.

“A lot of people are looking for a certain signal to make a (buying) decision,” he says, noting the survey found about 70 per cent of respondents were waiting for prices to come down.

Another 60 per cent noted a drop in interest rates would get them house hunting, while about three in 10 would buy if their parents or other deep-pocketed family members could pitch in for a down payment.

“Everyone is looking for a trigger, and I don’t know if the triggers they’re looking for are the right ones.”

The problem is, for example, that a cut in interest rates — while increasing buyer purchasing power — ultimately will bring more buyers to the market amid short housing supply.

The outcome is likely higher prices.

As for waiting for prices to fall, the most likely scenario to cause lower prices — which has already happened in most markets in Canada — would be more interest rate hikes.

That would make mortgages costlier. Demand would fall, and so would prices because people can’t afford the borrowing costs.

It’s a catch-22, and a tough pill to swallow for Canadians on the outside looking in at the housing dream.

Politicians get this. The disaffection of Canadians under age 45 — a massive cohort of voters — not being able to achieve the same financial milestones as their parents is arguably driving polls. It may not be the only issue, but it’s why the Conservatives tried to push through a recent bill to punish cities for not creating housing fast enough. It’s also why the Liberal government announced several new measures to create new supply and lower the entry point for first-time buyers.

Yet announcements like providing 30-year amortizations — which helps lower monthly payments — up from 25 years for first-time buyers on only new home purchases is unlikely to have much impact, says a Winnipeg mortgage broker.

“What first-time homebuyers can qualify for (a mortgage for) new builds?” says Rosa Bovino with Invis, noting new builds cost more than resale by and large. CMHC (Canada Mortgage and Housing Corporation) data from January to April shows 88 per cent new single-family homes in Winnipeg sold for at least $500,000, with 50 per cent selling for more than $600,000.

(The average aggregate home price at the end of March for a resale was about $430,000.)

As well, increasing the Home Buyer’s Plan, allowing individuals to borrow up to $60,000 from their RRSP from $35,000, for a downpayment, begs a similar question: What first-time buyer has that much retirement money saved?

Bovino says she would like the government to increase amortization to 40 years to help firsttime buyers. Yet she also understands the reluctance — given shortage of supply and the impact on pricing from measures that increase demand.

The federal plan to build nearly 4 million homes by 2031 could help alleviate the problem. But its feasibility is questionable, given Statistics Canada data on housing starts show the most homes built in any given year was about 271,000 in 2021.

Canada’s homebuilding industry would have to double its annual production amid current labour and material shortages. That too would drive inflation and likely limit how much interest rates can come down.

In short, waiting for a sign is unlikely to help.

“Buyers today have to face the reality that they will allocate much more of their money toward housing,” Ng says.

Even though interest rates — less than five per cent in many instances for five-year, fixed-rate mortgages — are at historical norms, the recent past of low interest rates actually fuelled runaway price growth to historical highs.

Winnipeg Regional Real Estate Board statistics show the average price is down from the peak in January 2022, before interest rates began their ascent.

Even with the drop in prices, the single-family detached home remains a tough financial reach.

In turn, first-timers may want to look at less costly housing types, like condominiums (with an average price of about $276,000), just to get their foot in the door, says James Laird, co-chief executive officer of Ratehub.ca, especially considering they have to pass the federal stress test to get a mortgage.

“The stress test is a good thing ensuring buyers don’t get in over their heads if interest rates rise, but it certainly makes it challenging to enter the market, ” he adds.

Indeed, these are challenging times for first-time buyers.

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com