Couple on balcony

by Michael Moldenhauer

Michael Moldenhauer is the 2008 BILD President, and is also president of Moldenhauer Lifestyles.

Homeownership rate at all-time high

Homeownership is at an all-time high. Statistics Canada reports census data that shows 68.4 per cent of Canadians owned their homes in 2006, up from 65.8 per cent in 2001 and 60 per cent in 1971.

Interest rates at or near historical lows combined with low unemployment and recent regulatory changes that allow people to buy houses with lower down payments and longer amortization periods are behind the ownership trend (more on this below).

The number of one-person households swelled by almost 12 per cent between 2001 and 2006, more than double the rate of other households, according to the latest census results.

This makes them the fastest growing group of householders in Canada. By contrast, households composed of couples with children have held at 0.4 per cent growth.

More than one in four Canadian households (26.8 per cent) consists of a single homeowner living alone.

A report released by Statistics Canada shows home ownership rates for those living alone are growing faster than among the general population. Just under half (47.8 per cent) of people living alone owned their own place in 2006, the agency says, and women are more likely to buy than men, at 48.7 per cent compared to 46.7 per cent.

Mortgage innovation

In a recent analysis of major urban markets, RBC Royal Bank also points to changes in financing as one of the reasons housing markets have continued so strong for so long. "Higher loan-to-value ratios and longer amortization periods of up to 40 years may have opened the market to a wider range of buyers," the RBC report states.

What RBC is referring to is the federal government decision to increase the mortgage insurance threshold from 75 to 80 per cent loan to value. In other words, the down payment necessary to obtain conventional (non-insured) mortgage financing is now 20 per cent versus 25 per cent.

The 40-year amortization is just that. Whereas homebuyers have typically looked at a 25 year amortization and then worked liked hell to shorten that timeframe, there has been a minor trend toward longer (than 25 years) amortizations as a means of qualifying homebuyers.

Handle with care

While non-conventional mortgage financing such as extended amortizations represents a miniscule percentage of the overall market, there is obviously a link between monthly carrying costs and access to homeownership. Housing affordability is a numbers game but we have to be extremely careful about how we play with the numbers.

Don't get me wrong - I would love it if our homeownership rate kept growing -- but changing long-held financing benchmarks and conventions has to be done with great care and analysis because the other side of the sword is shown by the current housing market mess-up in the U. S.

Instead of just taking the price for granted and playing the numbers game, maybe we should be looking at how the price itself is made up, and I hate to tell you this, but a lot of it is government-driven taxes, fees, levies and regulatory costs. We're fighting like hell at the local, provincial and national levels of our association to keep those government-imposed costs down so that the homeownership rate can keep on going up.