A Disappointing Survey from RBC, in More Ways than One

home-buying-intentionsThe 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:

  1. 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.
  2. High Prices
    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.
  3. 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.
  4. Job Insecurity
    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.

PrintReal 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:

  1. A banker: 76%
  2. Family: 27%
  3. Real estate agent: 23%
  4. Friends: 20%
  5. Real estate websites: 11%
  6. Mobile applications: 11%
  7. Private sale websites: 8%
  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

  1. Good story Rob. Banks pay companies like Ipsos Reid tens of thousands of dollars to put out these surveys. So I think the survey company itself deserves just as much blame since they are taking the money and putting their name on the reports. Research firms are supposed to be polling experts. I highly doubt they accidentally overlook anything when it comes to designing these surveys.

  2. Ipsos need to be informed that the survey is biased. Bias in statistics voids the survey.
    Now who is gonna inform Ipsos ? Not RBC for sure.

  3. Typically my clients have been intelligent sophisticated home owners…see who RBC is insulting and alienating? This report will only confuse those who simply aren’t current on the broker business and likely never will be either. it appears to be a glaring ‘whoops’ on RBC or Ipsos behalf that will not be material in anyone’s mind who appreciates our service.
    Thanks Rob for your article…we don’t often see such obvious faux pas as this…humourous to be honest.

  4. First text book we had to buy for a third year university stats course was titled “How to Lie with Statistics”. I believe in RBC’s numbers as much as I do in CAAMP’s numbers.

  5. If RBC (‘the client’) gave Ipsos-Reid a list of eight sources of mortgage advice and asked the pollster to ask, “*From the following list*, which sources…” then I-R’s hands may have been tied.
    So I’m not sure that Ipsos-Reid is to blame for the results, but it’s definitely a dirty trick on RBC’s part. It would be like asking the question, “Of the auto companies based in North America, do you prefer GM or Chrysler?”

  6. How is it that the RBC report showing ‘the top sources of mortgage advice’ broken down as a % adds up to 183% of those surveyed?
    Is this some sort of new higher level math…

  7. I like David O’Gorman’s take,logical and unbias, stats are meant to favour the source, so when pointing out CAAMP’s 61%, why not put out there the question in CAAMP’s survey that got 61% and what the other choices were if any. By not doing this, CMT is showing it’s bias to Brokers!!!

  8. Hi Sean,
    That 61% statistic is simply used to support the fact that brokers are also consulted by mortgage shoppers. Nowhere does it suggest that bankers are not also consulted, and no where does it say that brokers are consulted more than bankers.
    Here is the CAAMP survey if you’d like to analyze its data (see page 17):
    CAAMP Fall Report
    CAAMP asked consumers which type of mortgage representative they consulted when getting a new mortgage and renewing a mortgage. The results for new mortgages were as follows:
    Banker: 67%
    Broker: 61% (as noted)
    CU Rep: 24%
    Life/Trustco Rep: 14%
    Other: 5%
    One can argue with that 61% number but whatever the actual number is, it’s higher than zero. Unlike RBC’s survey, CAAMP’s research clearly acknowledges that consumers speak to other mortgage professionals.
    Cheers…

  9. Well, clearly brokers should have been included in the list. Point noted! But really, isn’t that an ancilliary point? Are we not chasing rats while the house is burning down?
    I read the report yesterday, and I did not even notice the presence, or absence, of brokers in the survey list. One understands that brokers might be upset, but please understand that most people in the world are not brokers!
    And so for the rest of us, the real news here is huge drop in house-purchasing plans. And I am wondering what the rest of the non-broker audience think of that development? Is it laudable or not?
    Personally, I think its a good thing, at any rate if the trend is sustained. For one thing, it means that people are finally getting real: house buyers are finally matching purchasing price to real household incomes.
    So dare we hope to see the end of irrational exuberance in the canadian real estate market, before it is too late? One can only wish!

  10. It’s way to early to call the death of the housing market. High prices are caused by high demand and low supply. There is nothing irrational about that. You can claim that longer amortizations gave housing an overboost, but in reality that’s a very small part of the price equation.
    Also, I wouldn’t downplay banks putting out bad research. This is a very real issue because this stuff gets into the media and misleads people. It’s good to see someone finally taking a bank to task for these advertorials they call research.

  11. Are you saying we should just dismiss all surveys? That makes no sense. Even if a survey is biased, it can have value depending on how the data is collected.

  12. What about cash flow positive rentals?
    Lowering amortization from 35 to 25 years makes a big difference in the cash flow.

  13. Affording a house is only one side of the coin. Some people have better things to do with their money than make a mortgage payment. Amortizations over 25 years give people needed flexibility to manage their affairs in the most efficient manner possible.
    For example, I have clients with 2.25% mortgages and 30 year amortizations. Investing their payment savings at a higher return than their mortgage rate puts them much further ahead.

  14. I agree that 2.25% is a rate that there is no urgency to pay off (it is essentially free money), but why bother amortizing over 30 yrs? If you can’t afford the same purchase with 25 yrs w/ 2.25%, you are REALLY stretched — especially if rates rise.

  15. A cash flow positive rental property that is only “positive” with a 35-yr amortization is a risk. Rates will go up eventually, and that property will no longer be cash flow positive.
    Again, in my opinion, if a house isn’t affordable (or isn’t cash flow positive) with a 25-yr amortization, it is not a wise purchase. Look for something more affordable / more profitable elsewhere.

  16. You’re missing the point. It’s very simple. Most people can afford to purchase with a 25 year amortization but sometimes it makes more sense to extend it and use the money for something else.

  17. Yes I agree (sort of) but at the end of the day shouldn’t everything add up to 100%
    We are not talking about year over year growth etc.
    The number of participants surveyed is a known mumber and represented as ‘n’ That is what 100% is based upon… So 183% of 100% indicates some must have been asked the same question twice. lol

  18. CML is not saying disregard all surveys, they are just saying that this survey is tainted, which it is.
    I have a degree in statistics and don’t see the value in this survey when you leave out a main componet or variable in the survey.
    If all surveys were conducted in this manner, then we can manipulate them to say whatever we wanted and then all surveys would be redundant and have no value.

  19. Reread Statguy’s answer. You didn’t understand it.
    People were asked to identify the SOURCES (plural) of info.
    The 100% is the number of people, not the sum of the sources of info.

  20. Well done, Rob, thanks for highlighting such a glaring omission by a ‘respected’ institution. Unfortunately, consumer habits are swayed to a large extent by such information, leaving the mortgage broker community up against the wall once again in its efforts to gain consumer confidence.

  21. My tounge and cheek response is probably representative of how the majority of consumers (pardon the pun) might interpret and subsequently scoff at the message from a statement like the one offered up by the survey: “Majority of Canadian’s turn to bankers’ for mortgage advice” However, when you do actually take the time to really read the question and analyze what the data is trying to tell us the answer makes sense in that context.
    Q13b. Which of the following sources do you intend to use, or are you likely to use, for assistance or advice on your real estate or mortgage needs?
    Base: Pre first time home buyers/First time home owners//Next time home buyers 2013 (n=493)

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