Buy now or cry later.
There are seven solid reasons why this period could be the best time to buy a home, but to understand this let’s start by recapping what has happened over the last couple of years.
There is a lot of chaos to sift through in the world today. To say it has been a very volatile market is an understatement. With ample sales and a fair appreciation of houses in April 2020, it looked like we were going to have a good year, but the pandemic hit the real estate market at the same time that many other industries went on an immediate pause.
Sales slowed, and prices dipped. Then, as interest rates fell to almost zero, houses started flying off the market. Prices skyrocketed, and inventory was so low that bidding wars became the norm.
Fast forward to this year, with inflation now out of control, the Bank of Canada has made several aggressive rate increases causing the housing prices to drop faster than they went up. Today we are in a transitional period, which happens to be a perfect opportunity to get into the market.
It may last a month or it may carry over into next year, but I do believe this opportunity will change and it will happen quickly.
These are the seven reasons I believe the time is right:
- Housing prices are lower, and even considering higher interest rates your payments would be similar when buying an average-priced house in Guelph or the Tri-cities in September to what they would have been in February. Right now you would be paying $39 more a month while also being in debt to the bank for less money.
- Your deposit will be lower. With the price of homes decreasing, you’re now paying a much lower deposit than you would have during the peak; actually, the average amount in Guelph/Tri-cities in February was $99,349, compared to August where the average price decreased significantly to $73,555 (assuming in both cases you were putting 10% down). That is $25,794 less that you would have to come up with.
- There is more inventory. The month of January had an average of 334 active listings, while the month of August had 1262. That is 3.8 times more inventory for buyers to choose from.
- Homes are staying on the market longer. The average days on market was 35 in August compared to 10 in January. This means that, as a buyer, there isn’t a need to see a house and put an offer in immediately. That being said, this is still an average number and if you really love a home and have the ability to, you should put an offer in as soon as possible because it does still have the ability to sell quickly.
- You no longer have to compete – The majority of homes in this market are not going to multiple offers. With fewer sales and more inventory, buyers are able to include conditions in their offers again like financing and home inspection. We are even seeing the condition of “sale of buyer property” more often now, which we haven’t seen for several years.
- Interest rates will come down. The vast majority of financial planners agree, interest rates will come down in 2023 or 2024 and when they do this will be great news for people that bought at higher interest rates. If your mortgage is variable your payment will go down, or you would have the option to keep your payment the same and pay off more of your principal. When purchasing a home it’s a good idea to consider a variable interest rate mortgage or a two year fixed rate mortgage. This will allow you to take advantage of lower interest rates when they happen.
- Rental amounts have gone up. There are so many reasons why owning a home is better than renting: ultimately it allows you to be in control of your own destiny and not at the mercy of a landlord if they choose to sell, renovate or lease to bad tenants. Today, the cost of renting a 1 bedroom in Guelph averages $2,014 per month which is an increase of 16.6% from last year, and a 1 bedroom in Kitchener is sitting at an average of $1,723, which is an 11.2% increase from last year. For many, the monthly payments you’re contributing to owning a house may be less than what you would pay in rent.
In Canada, prices have historically appreciated over any 7-year period, and today we’re still seeing a large demand.
We’ll see a large increase in immigration over the next several years, and the ability to build houses quickly enough to meet this demand will be tough. Real estate will continue to be a good investment; it’s one of the few places where you can put your money that will give you the unique ability to enjoy and utilize your purchase every day, while at the same time still allowing it to appreciate and sell for more money down the road.
