Use of Real Estate Agents on the Rise, Says CMHC Survey

Written by Posted On Monday, 09 December 2019 05:30

Despite the rise of private sale options, more homebuyers are turning to real estate agents to help them with their purchase, says a new survey by Canada Mortgage and Housing Corp. (CMHC).

The 2019 Mortgage Consumer Survey says 78 percent of buyers interacted with a real estate agent, up from 61 percent who used an agent in 2018.

“There was a strong increase in buyers’ perceptions of the value of working with a real estate agent,” says the survey. “The percentage of homebuyers who recognized the value of using an agent rose from 28 percent in 2018 to 35 percent this year. Some of the key reasons buyers highlighted for this trend were an appreciation for the advice they received from their agent and their agent’s attentiveness for their specific needs.”

The internet is full of online sites providing listings of homes for sale and mortgage information, and 30 percent of buyers said they researched buying a home or obtaining a mortgage exclusively on the internet. There was a big increase in the use of real estate listing websites, from 22 percent last year to 36 percent in 2019, while the use of lender websites dropped from 66 percent to 45 percent.

But 47 percent of buyers said they used both online and offline resources and 23 percent did all their research offline. Only 29 percent of buyers said they used social media to gather mortgage and home-buying information.

The survey says there was an increase in uncertainty about buying a home, which may be why more buyers sought out real estate agents for advice. Forty-seven percent of buyers admitted to being concerned, with most worrying about unforeseen housing costs or paying too much for a home. One in four buyers in 2019 were involved in a bidding war.

About a third of buyers received recommendations for real estate agents from family members. Mortgage brokers got 34 percent of their recommendations from real estate agents. The use of mortgage brokers was also up overall, from 36 percent in 2018 to 49 percent in 2019.

The survey asked buyers what they “want” and what they “need” in a home and found that the practical side of buying an affordable home won out over the wish list.

For example, the top three “needs” were affordability, number of rooms in the home and proximity to public transit. The top three “wants” were buying a newly built home, finding a fixer-upper and proximity to shopping, restaurants and entertainment.

Location, location, location may no longer be the most important factor when buying a home, as 56 percent of buyers said the type of neighbourhood was more of a “want” than a “need”.

“One of the biggest stories of 2019 was the dramatic decrease in the number of homebuyers who chose to spend the maximum amount they could afford on their home,” says the survey. “This suggests that many Canadians may be shying away from the ‘house-rich, cash-poor’ approach of past years.”

It says that in 2018, 78 percent of buyers purchased the highest-price home they could afford. In 2019, that dropped to 60 percent.
The main source for down payments was equity from a previous home and savings outside of a Registered Retirement Savings Plan.

There were fewer first-time buyers than the previous year – 56 percent were first-timers in 2018 compared to 47 percent this year. Part of the reason for that could be the mortgage stress test regulations, which were in effect for all of 2019. The test requires borrowers to qualify for a mortgage at two percentage points more than the offered rate.

However, the survey reports that 76 percent of buyers said the stress test had little or no impact on their decision to buy a home. Those who were impacted by the rules said they were still able to buy by making other compromises, such as buying a smaller or less expensive home, cutting back on other expenses or dipping deeper into their savings.

The stress test was introduced to try and put a lid on rising consumer debt. Sixty-five percent of buyers surveyed by CMHC said they believe the stress test will keep more Canadians from taking on a mortgage they can’t afford. Meanwhile, those who already purchased a home say they didn’t have any trouble keeping up with their payments (86 percent) and 32 percent said they are making higher mortgage payments than the minimum amount required.

Among those who said they are having some trouble making payments, 73 percent said it was because of credit card debt. Just over half are struggling because of their current mortgage. Forty-five percent said their problems are due to unexpected spending related to their home purchase and 34 percent reported a decrease in household income.

Buyers surveyed are extremely confident in the long-term financial prospects of homeownership (87 percent). Forty-seven percent said they were “happy” and 39 percent were “excited” about buying a home, but 34 percent of buyers said that buying a home made them feel “stressed”.

More than 60 percent plan to renovate in the next five years, planning to spend an average of $18,000.

Finally, 81 percent of buyers said their current home meets their needs.

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Jim Adair

Jim Adair has been writing about Canadian real estate, home building and renovation issues for more than 40 years. He is the former editor of Canada’s leading trade magazine for real estate professionals, as well as several home building, décor and renovation titles. You can contact him at [email protected]

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