You know, we’ve met a lot of buyers who’ve tried to play the market and put buying off until housing prices “flatten out.” They like to think that what the 60’s band Blood, Sweat and Tears once sang about, namely, “what goes up must come down” will work in their favour and they’ll finally beat the market and pay way below what everyone else is paying. Unfortunately, that’s not the way things work in the world of real estate. Things tend to go the opposite way and just keep rising. That’s why now is always a better time to buy a home in Toronto, if your finances can manage it!
Here we look at the concept of buying “now,” and explain why now tends to be better than waiting.
What to Consider When Buying Now
The most important things to consider when buying a home now include:
- Inventory: The more homes on the market, the more buying power you have. When inventory is high, you also have more choices and are more likely to find a home to suit your needs. However, inventory is always relevant to the number of buyers. So, if you’re nervous inventory seems low, consider your competition. Are there tons of buyers out there right now, or are there limited buyers, putting you in the driver’s seat despite the inventory feeling low? The answer is, there are fewer buyers, so inventory will continue to provide the supply needed to give you more buying power right now.
- Average days on market: This might not seem relevant, but it really is. See, when houses go fast, the market is skewed more towards a sellers’ market. However, when houses are sitting on the market longer, sellers start to feel a little antsy, which means they are more motivated and will be more open to negotiation to get their homes sold. Right now, homes are sitting on the market longer. The average days on market increased by 13.6% year over year in November, a big opportunity you don’t want to miss!
- Overall seller motivation: Another thing driving a lot of buyers right now is high interest rates. We understand that might also be keeping you from wanting to buy now but hear us out on this one. Because interest rates are high, homeowners with variable rates are feeling the pain right now. That means many are under pressure to sell because they missed their window of opportunity to lock in before interest rates really skyrocketed. If you can afford your mortgage payments based on a pre-approved rate and budget, you can negotiate with motivated buyers and get the home of your dreams. You can also feel confident this is the one case where things will go down in real estate interest rate wise – eventually.
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What About High Interest Rates Now?
Okay, we don’t want to mislead you in any way. We believe in honesty first – always. Yes, interest rates are high now. So, what is particularly important when buying now is weighing your buying power against the possibility of higher mortgage payments. This is no different than buying a house at any time. You can’t buy a home unless you know with 100% certainty you can handle your payments and that your lender will be willing to pre-approve you.
As we said, this is the one case where interest rates are high now but will eventually go down for sure. Since the Bank of Canada is holding rates steady at 5%, economists are saying the bank is finally done with increases and will start to cut rates in the first half of 2024. So, if you lock into a rate now through pre-approval, start your house hunt and consider it might take months to find a home, choose a closing date and move into your home, should rates decrease in the meanwhile, your lender will likely honour the lower rate. So, there’s that.
Also, if your finances can manage it, because the Bank of Canada is likely done with increases, you might consider a variable mortgage and reap the rewards sooner once rates start to decrease. If your interest rate is around 5% and the BoC lowers their rates in the first half of the year, you can discuss locking in with your lender when you feel the rate is more comfortable and that you’ll enjoy better savings over the term of the mortgage. It’s all about amortization.
What is Amortization?
Amortization refers to how the lender spreads your mortgage payments out over a set period of time. The schedule focuses on a maturity date allowing you to spread the cost of your home into manageable payments. Your lender sets a mortgage term which is typically five-year periods for your contract and interest rate, which is renewed at the end of the term. The amortization period on the other hand refers to the total life of your mortgage until it is expected to be completely paid off. In Canada, a typical mortgage has a 5-year term and a 25-year amortization period. The longer the amortization period, the longer it takes to pay off your mortgage and the more interest you end up paying over the life of your mortgage.
Get more tips and advice before buying a home in Toronto with these posts next:
- Benefits of Buying Real Estate During a Recession
- 10 Signs a Home is “The One”
- Is it a Good Idea to Buy a House without Seeing it IRL?
But Are Housing Prices Dropping Now?
Higher interest rates are cooling the market, with GTA sales down on a year-over-year basis in November. However, listings were up. That means more choices for you, and flat prices that are contributing to affordability. The average selling price was $1,082,179 in November, indicating things have flattened. In fact, the average selling price was down 2.2 % when looking at the month-over-month numbers. As a result, prices have adjusted. So now is a good time to buy, especially considering that population growth is reaching a record pace that will impact demand next year. If you buy now, you’ll take advantage of high inventory, adjusted home prices, and reduced competition due to higher interest rates.
The Bottom Line
We always say that the only thing that tells you if buying now is right, is if it is right for you. Therefore, you’re likely ready to buy now based on the following:
- Your finances and income are stable, and the bank will pre-approve you
- Your personal circumstances are also stable whether you’re single and loving it, in a serious committed relationship and ready to move in together, or just in a good place
- Finding the right home in the right area without overpaying for a home you don’t love
Speaking to the best real estate team in Toronto is the first step to finding out what buying now means to you. Considering buying now? Call The Christine Cowern Team at 416.291.7372 or email us at firstname.lastname@example.org with any questions or to set up a call. We’d love to work with you!