Why first-time buyers are finding new opportunities in Winnipeg

Against the backdrop of a marked overall cooldown in Canada’s housing market, sales activity in Winnipeg fell by 15% on a year-over-year basis in August, according to the Winnipeg Regional Real Estate Board (WRREB).

Still, the 1,375 properties that changed hands that month represented a 9% increase over the five-year average, and new inventory coming on to the market could prove something of a fillip for those looking to enter the market in the city.

Available listings had risen by 28% over the same month last year, WRREB said, with 3,764 properties now on the market – mainly due to those lower sales figures compared with 2021, said WRREB president Akash Bedi.

While first-time buyers regularly found themselves priced out of the market or outbid during the feverish competition of the past two years, many are now experiencing an environment that’s much more favourable, according to Winnipeg-based broker Caily MacGregor (pictured top) of One-Link Mortgage and Financial.

She told Canadian Mortgage Professional that the swing back towards a buyer’s market had given a welcome boost to those Canadians who might have been unable to purchase in recent times, even despite a series of interest rate hikes throughout the year to date.

“Although the interest rates have increased, a lot of the first-time homebuyers are able to find homes now where over the last couple of years, it’s been a very challenging market for them to get into,” she said.

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“But now, I’m seeing a lot of first-time homebuyers purchasing with a financing condition and inspection condition at least, where the past two years we have not seen any of those conditions in the offers and they [were] typically going for much over what list is.”

Bedi said in remarks accompanying WRREB’s latest release that sellers were beginning to notice changes in the market, particularly with agreed prices above the list price now much less common than had been the case even earlier in 2022.

Sixty-three per cent (63%) of single-family home sales sold for less than their listed price in August, he said, compared with 29% for more than their list price. That compared with 67% of single-family homes selling for more than their list price in March and April, with that level not falling below 50% throughout the first six months of the year.

Record-low interest rates fuelled much of the frenetic housing market activity of the pandemic’s first two years, although the Bank of Canada has now hiked its own benchmark interest rate by a total of 3% through five consecutive increases.

Hikes by the central bank and lenders alike mean borrowers can no longer avail of those rock-bottom rates, and with variable rates set to rise even further in the coming months, MacGregor noted that many clients are opting for the security of a fixed mortgage.

That said, choosing a shorter-term fixed product means clients still have a degree of flexibility in the event that rates start to tick downwards again in the coming years, she added.

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“Typically, on the first-time homebuyer range, they like to have more fixed budgets [and] are more comfortable on fixed products,” she said. “So I’m actually looking more into shorter-term fixed products right now for clients, rather than the five-year fixed.

“I do still have clients taking advantage of old rate holds that are in the 3% [range], but for the most part, looking to the future, a lot of them are more interested in the shorter-term fixed rates than maybe locking in a five-year – so that’s more prevalent right now in this market.”

That strategy allows clients to potentially shorten the length of time they’re borrowing at a higher rate without having to contend with the high interest rate differential (IRD) penalty associated with breaking a fixed-rate mortgage, MacGregor said – something that can offer mortgage brokers a strong way of differentiating themselves from banks.

“I think educating clients on these IRD penalties that could come into play is going to be a good advantage against the banks. A lot of them are selling five-year fixed rates right now,” she said.

“And in the event that rates go down in two, three years, you can show them the difference of what a bank penalty would be versus what a monoline penalty would be. There’s a lot of advantage there with showing that to clients.”