A Disappointing Survey from RBC, in More Ways than One
The number of people planning to buy a home has plunged.
Only 15% of those polled by RBC said they are likely to buy a home in the next two years. That’s down from 27% in 2012.
It’s the largest drop in prospective home buyers ever in the 20-year history of RBC’s home ownership survey.
Some may find this gloomy news, but housing is cyclical and corrections must be expected. We were actually more disappointed by another issue in RBC’s survey (more on that below).
First off, there is the obvious question, which has some obvious answers:
Why are more people backing out of the real estate market?
The reasons include:
Stricter Mortgage Rules
Ottawa imposed a slew of mortgage rules last year, and the amortization reduction (from 30 to 25 years on high-ratio mortgages) had the biggest impact. Almost 4 in 10 prospective Canadian home buyers said that the amortization change limits or delays their ability to purchase a home, according to RBC.
Overall, payment affordability is reasonable on a national basis (and far below its peak of unaffordability in the 1990s). But the average home price of $368,895 is still well above many people’s means. For some, even the modest 5% minimum down payment doesn’t make home ownership any easier. RBC says that 38% cited the minimum down payment requirement as limiting or delaying their ability to purchase a home. Among first-time buyers, 46% cited unaffordability as a top reason for not buying.
Fear of Overpaying
Some people will naturally refuse to buy when they’re concerned that home prices may tumble. When media outlets like Macleans proclaim, “The housing bubble has burst, and few will emerge unscathed,” it absolutely affects market psychology.
In the survey, 28% said concerns about job security were one of the reasons they haven’t bought yet. That’s up from 20% in last year’s poll.
Real estate analysts and policy-makers in Ottawa are anxiously watching to see if spring demand will turn housing around. If inventories keep building, and low rates don’t keep sales on pace, it could make for a bearish summer market, nationally speaking.
Now let’s shift gears a bit. Here’s something that seems to speak to the motives behind this survey.
In one of the poll questions, RBC asks people who they turn to for mortgage advice. Here are the top sources of mortgage advice, as reported by RBC:
A banker: 76%
Real estate agent: 23%
Real estate websites: 11%
Mobile applications: 11%
Private sale websites: 8%
Social media sites: 7%
Notice any glaring omissions?
That’s right. RBC and Ipsos Reid left mortgage brokers completely out of the survey.
That’s despite the fact that 61% of Canadians polled by CAAMP consulted mortgage brokers when getting a new mortgage.
It may not surprise people that a bank doesn’t want to promote brokers—it’s competition. But from a research credibility standpoint, we were surprised.
RBC bills itself as “the country’s number one source of financial advice on homeownership.” Shouldn’t that title require some degree of research professionalism and objectivity?
Why would a company with RBC’s good reputation omit (intentionally or not) data that provides a fair representation of the marketplace? This makes us wonder what else they left out.
If an organization is going to purport to make newsworthy contributions to the national housing dialogue, it better realize that people are watching its every word. One-sided survey results are nothing more than marketing masquerading as news. This example taints RBC’s mortgage-related surveys going forward, for no good reason.
Rob McLister, CMT
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