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MARLENE HABIB

Saturday, April 19, 2003

TORONTO -- House hunting, like a rite of spring in Canada, can reach a feverish pitch as thousands of investment seekers sift through their finances and decide if now is a good time to buy.

Veteran property owners may view checking out new digs as old hat, but potential first-time buyers have a lot to cope with -- wondering about income, costs, neighbourhoods and whether to jump into the market at all.

Driving the buy-or-wait quandary is the fact that competition for housing is brisk in the current sellers' market, when there's such a high demand for homes.

As well, interest rates are at historical lows and are expected to stay that way for a while, says Alberta Cefis, executive vice-president of retail lending services with Bank of Nova Sotia.

"This year is still an attractive rate environment and, for the purpose of getting into the home market, for many it's a good time to get in," Ms. Cefis says.

The average selling price in Canada rose to $215,975 in March from the previous high of $211,855 set in February. But banks are increasingly coming up with incentives to attract customers, including cut-rate financing for buyers who have little -- and even no -- money for a down payment.

Some aspiring homeowners fear that if they don't get into the market soon, they may never be able to afford to do so later. But opinions are mixed on that attitude.

"We expect further house increases down the road, so this is a very good time to buy," says Gregory Klump, senior economist with the Canadian Real Estate Association in Ottawa, which compiles monthly housing figures.

"We don't see prices going down in the foreseeable future, certainly not in the near term."

But housing economist Peter Norman is a firm believer that it's unwise to adopt the mentality of "Buy now or forever regret it" -- even in light of low mortgage rates.

"Don't say, 'I have to jump now or I'll never be able to do it.' That's not how housing works. It really stays constant over long periods of time," says Mr. Norman, vice-president of Clayton Research, a Toronto-based real estate economics firm.

Home-seekers need to take into account affordability -- such as how much they can spend on a home and down payment, and factor in property taxes, their income after expenses and other debts.

Various institutions offer tools -- including on-line programs -- that help calculate if it's more cost-effective to buy a home or continue renting.

Then, Mr. Norman suggests, assemble a set of criteria that should be adhered to before offering to buy a house or condominium. Such criteria may include the area of the city you want to live, the distance to travel to work or relatives and the size of the home.

"If you're a serious buyer, and you meet 70 to 80 per cent of the criteria you have for buying a home -- you're rarely going to meet all the criteria -- and you feel it's within your reach financially, then go for it," he advises.

"Don't set aside 50 per cent of the criteria and buy because you feel pressured either by a [real estate agent] or because you feel it's the best you can do."

But regardless of whether you're undecided about buying, it's good to secure financing -- shopping around for the best rates before getting a pre-approved mortgage, Mr. Klump says.

"Shop around, because the posted mortgage rate isn't necessarily the rate you'll get," he says.

"Often, the more business you give to an institution (for example, taking out a line of credit and opening an account), you can sometimes get 1 per cent below the posted rate."

Job growth -- with about two million jobs created in Canada in the past five years -- and family income have increased dramatically since 1998, driving the current high demand for housing, Mr. Norman says.

"It's actually a fundamental driver of demand right now and, quite frankly, will be over the next five or 10 years -- barring an unexpected event that usually has just short-term impact," he says.

Home prices during that period are predicted to increase in inflation-adjusted terms. But Mr. Norman believes there will be a "softness" in resale housing prices later this year and into 2004 as new-housing starts near completion, and new-home owners put their old residences on the market, creating more supply.

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