Echo Boomers Will Help the Local Housing Market in 2014: Analyst
If you plan to sell a house next year, you can thank the “echo boomers,” or children of baby boomers, for keeping the market steady in Waterloo Region and Guelph.
“We see them as helping to keep the market stable,” said Anthony Passarelli, a senior market analyst with the Canada Mortgage and Housing Corp.
He was speaking Wednesday at the corporation’s annual housing outlook conference in Kitchener.
The agency forecasts that sales of existing homes will remain steady at 6,600 units in Waterloo Region next year. It forecasts sales of 3,025 units in Guelph, again almost in line with this year’s sales.
Sales are expected to go up somewhat in the first half of the year, but will soften in the second part of the year as mortgage rates start to increase, it said.
Prices will just keep pace with the rate of inflation, the corporation said. The average price of a single-detached home is expected to be about $326,500 in Waterloo Region and $349,000 in Guelph.
Construction of new homes is expected to pick up next year in Waterloo Region, with a forecast of 2,325 housing starts. A total of 1,725 residential units have been started this year, making it one of the slowest years in recent history. There were 2,900 housing starts in 2012.
A lot of the new construction in Waterloo Region will be in the form of apartment buildings, particularly near the new light rail transit line, Passarelli said.
In Guelph, the corporation is forecasting 810 housing starts, slightly lower than this year.
Passarelli said a lot of the new demand in the housing market comes from the echo boomers who are now mostly in the 24- to 34-year-old group — a good age for getting married, starting families and getting into houses.
“About half of all first-time home buyers fall in that age group,” he said.
In Waterloo Region, that age group has a stronger influence on first-time home buying than in places like Toronto, Ottawa, Hamilton and London, he added.
“There are more of these younger households that have a strong presence in the first-time home-buying category in Kitchener, Cambridge and Waterloo,” he said. People between the ages of 18 and 35 comprise about two thirds of total net migration into this area, he added.
The echo boomers are making enough money to get a mortgage in the market here, Passarelli said. Even with big increase in the price of single-detached homes over the past five years, the average echo boomer household income, at just under $80,000 a year, remains above the level needed to buy an average single-detached house in the area, he said.
“There is still room for them to afford the homes, even if carrying costs increase slightly,” he said. That’s why they will help the local market remain stable, even if mortgage rates go up, he said.
The corporation said supply and demand will be “balanced” between buyers and sellers next year.
The region’s economy is taking a hit because of the layoffs at companies like BlackBerry and Maple Leaf Foods, but several manufacturing sectors, particularly automotive, metal and machinery products, should continue to provide jobs to support the housing market, Passarelli said.
A lot of the job growth is coming because of exports into the improving United States economy, he said. “The picture may not be as bleak as some people think,” Passarelli said.
Ted Tsiakopoulos, a regional economist with the corporation, said Ontario as a whole will see some growth in resale housing, but a slowdown in new construction because some communities are running out of land and new home prices are higher than resale homes.
Although there has been a lot of concern about the debt levels of Canadians, Tsiakopoulos said there is “constructive progress” in reducing the rate at which people are adding debt. Also, while long term mortgage rates will gradually move up, “we don’t think that will be enough to put a dent on sales,” he said.
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