housing market

Strong housing market to power through 2021

Monday, March 29, 2021

Will Canadians continue working from home after the pandemic winds down? No one knows for sure, and especially to what extent people will return to traditional office settings, but it may impact the housing market for some time.

In its annual report on the State of the Residential Mortgage Market, Mortgage Professionals Canada (MPC) reiterates what many market-observers are thinking: a strong 2020 housing market will likely power through this year.

The report incorporates data collected through an online survey of 1,957 Canadians conducted between January 18 and February 9, 2021 by Bond Brand Loyalty for Mortgage Professionals Canada. It also refrains from forecasting within the context of much uncertainty.

Findings show about 4.5 to 5 per cent of Canadians usually buy a new or existing home in any given year, but this number might rise to about 5.5 to 6 percent this year.

“There has been a quite small rise in the percentage of Canadians buying homes, but in proportional terms, this is a very large increase, and it is overwhelming the available supply,” explained Will Dunning, chief economist for MPC and report author. “It is possible, but far from certain, that this could continue for some time – that a small rise in the percentage of Canadians who buy homes could result in sustained very strong demand.”

As the report outlines, about six of the overall 10-million owner-occupied dwellings in Canada have mortgages. Some analysts predicted that mortgage defaults would rise during the pandemic, but this hasn’t been the case.

“Since June, Canada has experienced eight consecutive months of record-breaking real estate transaction figures,” saiid Paul Taylor, president & CEO of MPC. “Through the uncertainty, our collective desire for the stability and security that home ownership provides seems to have significantly buoyed the market. And while mortgage indebtedness has increased, so too has prudent repayment activity.”

Last year, he said, many Canadians decided to voluntarily increase their payments to shorten their mortgage amortization periods, amounting to $5.2 billion (annualized) in payments. “Further, lump sum payments totalled $28 billion and an additional $7 billion was paid to fully pay out mortgages. Canadians continue to exercise sound judgment in taking on mortgages and repaying mortgage debt.”

Forecasting post-pandemic demand for mortgages remains challenging amid the many powerful factors at play. such as work-from-home options and how that will affect housing choices.

“While interest rates have recently increased from record lows, and house prices have increased sharply, calculations of affordability continue to show that mortgage costs are still positive for home buying”, said Dunning. “Low interest rates have created ‘affordability space’ in which prices might rise. Unfortunately, the imbalance between demand and supply has allowed for extreme price growth to fill a lot of that space.”

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