First-time Hamilton home buyers won't see relief any time soon, CMHC says

Hamilton residents looking to buy a home won't see much relief in the near future as mortgage rates continue to rise.

That's according to a new report by the Canadian Mortgage and Housing Corporation (CMHC) released Thursday.

The report says housing prices in Hamilton will continue to rise, albeit at a slower pace than recent years. By the end of the year, the average price of a home in Hamilton will still sit around $1 million, and supply and demand for housing will be more even than it has been.

But it's still not great news for people trying to get into the housing market, says Anthony Passarelli, CMHC senior analyst of market insights.

"Based on our forecasts, the prospective buyer out there is not going to get much relief over the next few years due to the fact that mortgage rates are rising," he said. And that means it will likely be harder for renters to transition into home ownership, or for someone living with family to qualify to buy the home they want.

"In a rising mortgage rate environment, you're going to have those first-time buyers more affected," Passarelli said. "They're more sensitive to mortgage rate changes, generally because they tend to have lower down payments."

Despite the strong pace of housing starts, the housing stock in Canada is too low, Bob Dugan, CMHC chief economist said. The pace of new home construction forecast over the next several years will not be sufficient to rectify the shortfall and more housing supply is needed.

"We expect existing home sales to moderate this year and next, but will nevertheless remain near historically high levels," Dugan said.

"Likewise, new home construction will slow, but housing starts will remain at extraordinarily high levels over the next several years."

Due to increased housing prices, this will also eventually lead to higher rents, he said. 

"This is exacerbating affordability challenges not only for aspiring homeowners, but for renters as well," Dugan said.

"With mortgage rates rising and continued growth in house prices, home ownership might move out of reach for many aspiring home buyers."

Some people looking to enter the housing market may still have a chance, but more likely by purchasing a lower priced home than they would have bought a year ago, Passarelli said.

"That means you'll see more demand in the safer apartments, condo apartments, and likely more demand in some of the less expensive areas of Hamilton, such as Hamilton centre and Hamilton east," Passarelli said.