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First-timers key to reviving market

By
Real Estate Agent with RE/MAX Real Estate Advocates

 The expected return of first-time homebuyers to the marketplace is seen as key to the rejuvenation of Canada's housing sectors, says a real estate industry executive.

A growing number of newbies to home ownership-- considered the largest single buying segment--have been sitting on the sidelines since it became obvious Canada wasn't going to avoid the global recession, says Phil Soper, president and CEO of Brookfield Real Estate Services.

At the height of the housing boom, which started to deflate partway through 2007, first-time buyers accounted for as much as 70 per cent of all transactions, he says.

One of the key reasons --and a positive to the downturn-- has to do with the decline in house prices that followed in the wake of the recession.

"Significantly lower costs of ownership should bring the first-timer back to the kitchen table in increasing numbers this year, which would get the overall industry moving again," Soper told a recent Scotiabank forum on the economy and real estate.

Among the factors he pinpointed that would see the re-entry of first-timers are: - Targeted government incentives that include $750 for closing costs, and an increase in the RRSP withdrawal for a down payment. - Lower-priced homes. The national average selling price has fallen to $288,641, down from $312,852 a year ago, says the Canadian Real Estate Association. - Historically low mortgage rates. - Reduced risk through the return of the conditional offer.

In an interview, Soper said the lack of first-time buyers can stall the real estate market.

"It's like sand in the gears," he said.

Canada has managed to avoid the brutal real estate pounding the United States has had to endure.

There have so far been no wholesale foreclosures here and the credit markets remain fairly healthy. But resale activity slowed and the pace of new home construction shrivelled as consumer demand backed off.

The revival will be slow.

Housing construction starts across the country dropped to slightly more than 211,000 last year, which is about eight per cent below the average of 230,000 starts tallied annually from 2004 to 2007.

At the same time, the number of resale homes changing hands decreased by 17 per cent and the average price slipped one per cent.

Scotiabank has predicted a further decline for new and used housing this year.

Housing construction starts are going to fall to about 155,000, while resale figures will drop another 15 to 20 per cent-- along with another 10 per cent slide in prices.

By Marty Hope, Calgary HeraldJune 6, 2009  

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Rayna McKay

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