Market Conditions Are Great

"For anyone considering buying a new home, today's market conditions may well be the best in many decades," says Jerry Roehr, Past-President of the Canadian Home Builders' Association. "Whether you are a first-time home buyer or already own your current home, now is the right time to make the move. And if you are a renter who dreams about owning a home some day, that day may be much closer than you thought possible."

In the past year, housing affordability reached near-record levels. Housing affordability, a key concern for most home buyers, is the product of a number of factors such as interest rates and new home prices.

Interest rates.

The cost of financing a home is lower than it has been for years. For many first-time home buyers, mortgage payments represent the biggest cost of owning a home. With lower interest rates, the costs of home ownership have fallen or remained stable in most regions, compared to rental costs which have continued to rise. Home buyers can take advantage of today's favourable rates by "locking in" the rate on their mortgage for up to 10 years. Some new home builders may offer mortgages at below current rates, usually for a short term (1 or 2 years).

Mortgage flexibility.

In recent years, banks and other financial institutions have introduced new and innovative mortgage "products" designed to meet the diverse financing needs and desires of home buyers. A greater selection of rates, terms and options makes it easier than ever to find the right match between income and financing arrangements.

Housing prices.

Prices for new homes have remained flat in many regions, while dropping or increasing only slightly in others. At the same time, the total value of new homes has increased. In a highly competitive marketplace, builders are including more and better features into their homes and offering a greater range of options at no extra cost.

Home ownership as an alternative to renting.

A recent (late 1996) housing affordability study by Canada Mortgage and Housing Corporation (CMHC) showed that fully 37% of current renters could afford to buy a starter home. In addition to lower mortgage rates and attractive house prices, other positive factors included stable heating costs and property taxes. The survey also indicated that more than 70,000 first-time home buyers took advantage of the excellent market conditions during the first half of 1996, up 46% from the previous year.

Buy with 5% down.

CMHC's First Home Loan Insurance Program allows first-time home buyers to qualify for a mortgage with only a 5% down payment. In the past, saving for a down payment was often the biggest obstacle to home ownership; the Program assists people who have the cash flow to manage the ongoing costs of home ownership get into their own homes sooner.

Home buyers can qualify in a few different ways:

If they have not owned a home as a principal residence during the last five years; if within that time limit they had to sell their home due to a marital break-up (including common-law relationships) or move elsewhere for employment reasons; and, finally, if they have sold a principal residence at a loss. The Program has established price ceilings for houses dependent on geographical location, as well as some financial criteria for home buyers.

Use RRSP funds for home buying.

Home buyers can withdraw funds from their Registered Retirement Savings Plan, tax-free, to be used in the purchase of a home, up to $20,000 per person or $40,000 for a couple. To qualify, you must not have owned a home for use as your primary residence since January 1, 1993. Contact your local Revenue Canada office for detailed information.

Home ownership as an investment.

In the long term, house prices in most parts of Canada are expected to keep pace with inflation. Over time, home owners build up a tax-free asset for their retirement years and, of course, owning a home also provides low-cost accommodation once the mortgage has been paid off.

If you have been thinking about buying a new home, now is the time to take a closer look. Talk to lenders about your financing options. Visit professional home builders to see what they offer. Contact your local Home Builders' Association and the CMHC office in your area for more information, or call CMHC toll-free at 1-800-668-2642 for information and home buying publications.