"It's still very expensive to buy a house in Canada when we take into account the growth of incomes," she said. By the end of 2008, Bégin said home prices should still be increasing but at a much slower pace, more in line with inflation at about 2.5-3%.
That could mean an easier time for first-time homebuyers saving up for a down payment, said Bob Dugan, chief economist at the Canada Mortgage and Housing Corporation (CMHC).
"With house prices growing at 10% a year, it's hard to save up and not feel like you are falling behind the market," said Dugan, who characterized the Canadian market as "rebalancing." However, he said there is no danger of a collapse similar to that seen in the U.S.
Dugan said CMHC is forecasting home prices will appreciate by about 3.3% on average in 2008 and that they expect mortgage rates to remain stable through 2009 despite predictions by some economists that the overnight lending rate may rise as much as 100 basis points as the economy improves.
Dugan said mortgage rates are not directly linked to the Bank of Canada's overnight rate, but are more influenced by the bond market.
While he said each would-be homebuyer must assess their own finances and ensure they have the wherewithal to not only purchase a house, but withstand potential financial shocks, Dugan said the current market may represent a good opportunity.
"To me it looks like a nice, stable environment that should make home ownership an attractive option to a lot of households," Dugan said.
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January, 2008
