Francesca Asante-Frempong, a self-described "late bloomer," believes buying her first home at age 35 will have been worth the wait if economists are right about dwindling competition and ultra-low mortgage rates persisting into 2012.

"It's encouraging to know that, as far as being able to afford something, any time from now would be a good chance to do that," the newlywed said in an interview from England, where her husband is living until they find a home.

Asante-Frempong, a registered nurse in Toronto, says she's optimistic she can take her time searching for an affordable starter home in the city, one of Canada's hottest and most expensive real estate centres.

And the likelihood that mortgage rates will remain low well into next year means she doesn't have to rush out of her parents home and into a bidding war, she added.

"I think that at least, although I didn't invest in a condominium say four years ago, I'm ready to go right into a house where my friends (who did) may not be able to at this point."

First-time homebuyers like Asante-Frempong are poised to comprise an even bigger proportion of real estate activity next year. Sales and prices are expected to stabilize as demand from owners intent on upgrading while mortgages are cheap dries up after more than two years of stimulative interest rates.

Low overnight lending rates at the Bank of Canada — which have been at one per cent since September 2010 — affect variable mortgage rates and other loans tied to banks' prime rates. Meanwhile, government debt crises in Europe and the U.S. are keeping fixed rate mortgages at ultra low levels by depressing the bonds that back them.

Downward pressure

Mortgage rates had been expected to rise in 2011, increasing the cost of home ownership and keeping house prices in check. That was supposed to lead to a slowdown in the housing market, according to the predictions of several top economists at the end of 2010.

'Ultimately, it's not what [consumers] said, but what they did; and what they did was they went out and bought more homes.'—Gregory Klump, CREA chief economist

They were wrong. Now they believe that easing is coming in 2012.

A looming economic slowdown, tepid wage growth, unaffordable home prices and record consumer debt levels could put downward pressure on the market next year.

But those troubling signs, as well concerns about the domestic impact of turmoil outside Canada's borders should also push the Bank of Canada to leave interest rates on hold, fostering a friendly environment for home buyers.

Downsizing baby boomers, new household creation driven by a maturing Generation Y and a steady stream of immigrants are also likely to stimulate healthy demand.

However, economists project activity will moderate from the surprisingly robust levels seen this year.

Defying economic indicators

Many predicted home price appreciation would be tempered by economic indicators that pointed toward slower income growth and weak consumer confidence this year, said Julie Ades, an economist at the Conference Board of Canada.

"These factors suggested that the market would cool this year, which would have led to slower home price growth," she said.

"But it didn't happen."

Instead, home prices for the first 10 months of the year have risen 7.8 per cent year-over-year, according to the Canadian Real Estate Association.

Gregory Klump, CREA's chief economist, hypothesized last year that 2011's housing market would be summarized in one word: "boring." Looking back, the description he now uses is "volatile."

Home buying behaviour in 2011 was at odds with consumer confidence, which indicated record debt levels and a potential downturn in the economy would curb appetites for major purchases.

"Ultimately, it's not what they said, but what they did; and what they did was they went out and bought more homes," Klump said.