Is Right Now the Best Time to Buy Real Estate?
2020-11-23 | 06:45:53
Is This the Right Time to Buy Real Estate?
I came across an article written by Kevin Lutz of the Vancouver Sun 10 days ago titled: Should I buy Now? Or Wait a Bit Longer?
Usually I don’t wait 10 days to comment on an article or respond to what is going on in the world of real estate and mortgage financing. Most people are always holding their collective breath and waiting for the sky to fall.
Here are some common remarks I hear on a daily basis:
- There’s no way that home prices will continue to increase
- There’s no way that interest rates will stay this low
- What will happen to the value of my property in the years to come?
- If I wait a little longer, home prices will surely drop
I don’t want to use this post today to review the dozens of carefully crafted articles, reports, surveys, polls and, statistics that clearly expose the incredible record breaking home sales and price increases across Canada over the years and even during our current pandemic.
Despite COVID-19, shut-downs, halt in immigration and job losses, the alternate universe that is Canadian real estate continues to power forward.
At least for now…
I bought my first property nearly 25 years ago. Since then, I have sold one and currently own six. Folks, for those of you who own a home or multiple properties over the least 5 years or so, please remember the economic environment in which you bought.
Please tell me if when you purchased, the real estate market was such that:
- It was the perfect time to buy
- There was no bubble
- All housing market segments were priced correctly
- There were no bidding wars
- Interest rates were rock bottom and there was no “stress test”
What I want to discuss today, especially for those who are entering the market for the very first time, or not, is, who cares what the current data is telling us.
You weren’t surveyed. I wasn’t surveyed.
When you bought your first place: 3, 5, 10 or more years ago, I will guess the conversations you were having with friends and family went a little like this: it wasn’t the best time to buy, prices were too high for everything on the market, multiple offers made it even more difficult to purchase as low interest rates had everyone rushing into the market.
Sounds familiar, doesn’t it? And if you’re as old as me, you would have heard your own family talking about $100,000 priced homes in the GTA and growing suburbs as bordering on the insane.
And yet, both you and I, until humanity finds a different solution, need someplace to call home.
I have those clients who are waiting for home prices to drop dramatically. How dramatically lower will prices have to go before the purchase becomes a good or great deal?
But, prices continue to increase in several housing segments. For others, condos in particular, prices have stayed static or increased only slightly. Within every market, location, location, location now determines how sensitive prices are to demand and supply.
And then we’re bombarded with news reports that everyone is moving out of the city, that cities will be emptied and that everyone will be working from home from here on in.
In my opinion, I call BS on all that talk. It’s another conversation I’m happy to have with anyone who wants to have it but, cities aren’t going anywhere – we better hope they don’t disappear.
What’s easier to digest as a concept though is – you need to live in a “home”. Whether you rent or own, everyone one of us requires a dwelling, big or small.
Ask yourself, why you are buying, moving or adding space to your current home?
The most interesting stat coming from Mortgage Professionals Canada’s chief economist, Will Dunning, despite the pandemic is:
“Canadians continue to see homeownership as primarily a place to live, and secondarily as an investment…Homeownership is 75% about the housing and 25% about the ‘investment’ aspect.”
When answering whether now is a good time to buy and whether you should wait, your answer must focus on the following:
- Can I afford the property I wish to buy?
- Is it prudent for me to stretch my budget thin in light of the possible uncertainties in my industry sector as an employee or as an employer?
- Do I have a large enough down payment coming from my own savings rather than credit or equity pull-outs?
- Have I been diligent in maintaining a good credit score?
The reality is, and the point of my post today is, only if you are in a position whereby your financial and employment profile is secure, should you even consider to buy. That said, it does not really matter whether prices go up or down a little. CMHC continues to believe that prices should soften by about 8% in the coming new year. Since the pandemic began, prices have soared more than that amount. In the worst case scenario, you would still be paying more as you wait on the sidelines than you would have earlier this year, even if prices decrease by 8% over the first two quarters of 2021.
Please call me to discuss and review your financial profile if you are currently considering purchasing or expanding your current real estate portfolio. The answer on whether if it’s the right time or whether you should wait will not be the same for everyone – it never has in the past and it will not be so today, nor tomorrow.
Realizing the current real estate and mortgage financing climate, I would like to congratulate those first time buyers and, those moving or building a more appropriate space because it is difficult achieving a low interest rate mortgage here in Canada. Absolutely certain is the fact that the lower the rate, the more stringent the underwriting guidelines are.
Those of you entering the homeownership club should be commended for your savings habits, your dedication to maintaining high credit scores and perseverance in your employment whether you work for someone or work for yourself. Whether consciously or not, you have acknowledged your economy is not published in the media but created by your daily actions over a period of time.
History will prove that your decision to have a mortgage has helped you live in a neighbourhood where you were able to thrive and where you are happy to live. This, not because of the purchase price but rather, as a consequence of nurturing your own economy.
To continue this conversation or start one personal to your objectives, please connect with me anytime. I am more than happy to discuss with you or someone who needs more detailed information on answering “whether it is a good time to buy or, should I wait”. The answer can only be extracted through the observation of your financial reality.
Wishing everyone a great week ahead,
Marco
