Couple buying a house with a real estate agent

The latest intel on what home buyers want

The more you know about potential clients, the better you can serve them. The Canada Mortgage & Housing Corporation (CMHC) has just released the results of its first-of-its-kind survey of prospective home buyers.

Conducted last fall, the 2018 Prospective Home Buyers Survey gathered feedback from over 2,500 soon-to-be home buyers in Canada who intend to purchase a home within the next two years. Sixty per cent were first-time buyers; 20% previously owned a home; and, 20% currently own a home.

CMHC produced the survey as an educational tool for mortgage professionals, but it also contains valuable insights for REALTORS® on where they can be most helpful in the buying process, particularly when it comes to first-time buyers.

First-timers need extra TLC when it comes to budgeting

The survey shows that only 66% of first-time buyers claim to have a good understanding of the full cost of home ownership and only 69% agree that they have a good understanding of how much mortgage they can afford. Four-in-ten first-timers say they’re unlikely to have a financial buffer in case their expenses change in the future and only one-in-four are completely confident that they’re equipped to manage their mortgage and debt load.

For all of the findings mentioned above, the numbers are notably higher for previous owners and current owners. This suggests that with first-time buyers in particular, REALTORS® should plan on spending additional time, energy and resources to educate, advise and equip their first-time clients with the information they will need.  As well, take the time to qualify that purchaser and when necessary, help them adjust their housing expectations.

The survey indicates that first-time buyers would prefer to buy a single detached over an attached property, but want to spend less than $300,000. The report doesn’t indicate where the survey respondents live or hope to buy a home, but clearly if they’re moving to the Lower Mainland from just about anywhere in Canada except Greater Toronto, they’ll need help with “sticker shock” and a new game plan.  In addition and not surprisingly, first-time buyers are more likely to put down less than 20% as a down payment, and are more keen on purchasing a home that needs renovating – 14% compared to only 11% of previous owners and 7% of current owners.

Current owners are more prepared

The CMHC survey shows that nothing prepares you better for home ownership than being a home owner or having been one in the past.

Current owners are confident (83%) that they’ll find a home they can afford and they know what they want. The majority want a single detached home with almost one-third preferring brand new construction. Current owners are prepared to spend more, over one-third are prepared to spend over a half-million dollars, but similar to first-timers and previous owners, they say they can’t afford to spend more than what they plan on.

It stands to reason that current owners are the most financially equipped to buy a new home using their savings and equity from their current home, with only 66% indicating they’ll need a mortgage. Current owners are also prepared to spend the most on renovations with 44% planning on spending between $20,000 and $50,000.

REALTORS® may have experienced this survey response first hand; when prospective home buyers were given a hypothetical scenario where they’re unable to find their ideal home, current owners said they’re more willing to compromise on the size and location, rather than delay their purchase – only 28% indicated they’d delay, compared to 43% of first-time buyers and 45% of previous owners.

Don’t underestimate industry influence

One factor that would cause all buyers to potentially re-think buying (keeping in mind, almost half of the current owners indicated they intended to make their purchase by fall 2018) was changes to the housing industry. For example, mortgage qualification rule changes, interest rates and a rapid increase in home prices; these would most likely delay the purchase plans of all the prospective home buyers.

From the perspective of needing expert advice, it’s worth noting that the highest level of awareness of the recent mortgage qualification changes was only 58%, among current owners. Only 36% of first-time buyers were aware of the changes. Clearly, protecting your client’s interests, keeping them informed and assisting them at every step of the home buying process – including informing them of regulatory or legislative changes – is essential no matter what type of prospective buyer you’re working with.

For the complete CMHC survey results, click here. For quick highlights, with infographics, click here.