first time home buyers

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First-time home buyers are behind 45 per cent of all annual home sales in Canada according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).

A report released Tuesday by the association evaluated the 620,000 annual home sales between 2013 and the first quarter of 2015.  The 620,000 sales per year figure is based on sales activity as reported by the Canadian Real Estate Association.

First-time buyers, typically those between the ages of 25 and 34, were significant drivers of the real estate market, regardless of location. Regionally, first-timers in Ontario, Quebec and British Columbia made up a similar percentage of all purchases as the 45 per cent national average. However, in Alberta, they made up over half, with 53 per cent of buyers new to the market.

“Among first-time buyers the process of home buying is often kick-started by a change in personal circumstances or their financial circumstances, or by their perceptions about financial advantages of homeownership,” Will Dunning, CAAMP Chief Economist, wrote in the report. “Repeat buyers are more likely to mention dwelling location and features.”

The most common price range for new buyers was between $200,000 and $249,999, though the average sale price was higher at $318,000. It wasn’t far from how much buyers with more experience were paying for their homes. According to the report, purchasers buying a home for the second time paid $366,400. For subsequent buyers it was $390,200.

The average down payment for a first-timer was $67,000, or 21 per cent of the average purchase price, meaning they won’t have to pay for mortgage insurance since they’re putting down more than 20 per cent. However, looking at the most common percentages for down payments, a significant amount of first-timers aren’t making it over that threshold. According to the findings of the report, 62 per cent had a down payment of 20 per cent or less, with 30 per cent putting down between 5 and 10 per cent for their fist home.

However, a number of repeat buyers were also required to pay mortgage insurance with 46 per cent of second-time buyers and 35 per cent of buyers who have purchased more than two homes making down payments of less than 20 per cent. Altogether, 49 per cent of Canadian home buyers had down payments that were 20 per cent or less.

In the full report, CAAMP noted that outside of Toronto and Vancouver, the housing market is largely moderate with price growth “close to flat.”

The association raised concerns over job losses in oil-producing provinces and declining oil prices bringing about more mortgage problems, including higher arrears and mortgage defaults.

“CAAMP is concerned that these difficulties should not lead to a ‘pro-cyclical’ tightening of lending conditions on the part of the federal government, mortgage insurers, or lenders. Any such tightening would aggravate the weakness in the housing market, with the further consequence that weakness in the broader economy would also be aggravated,” the report said.

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