The housing market is cooling.  Should you buy now or wait to see if prices come down?

The housing market is cooling. Should you buy now or wait to see if prices come down?

Brydon Hopper is ready to buy a house.

He wants a two-bedroom, two-bathroom apartment in Toronto and expects to get a good deal as the city’s real estate market adjusts to rising interest rates and falling sales.

“I hope to find someone who has been in the market for longer than they want and is willing to lower the selling price,” Huber says. “Or someone who flips a house and is looking to sell quickly so that its price will drop with fewer people on the market.”

Hopper wants to jump on a property next month. However, at the same time, he wonders “Should I buy now or should I wait?”

Rising interest rates and an influx of new listings have dampened sales this spring, usually in the prime real estate season. In April, home sales fell 44 percent from a year earlier and 27 percent from March, according to the Toronto Regional Real Estate Council.

It has an effect on the prices, which have cooled down a bit. A TRREB report says the median home cost in April was $1.25 million compared to the highest cost in February of $1.33 million. Experts say the market is shifting from a seller’s market (decreasing supply and increasing demand) to a balanced market.

Huber hopes to turn into a buyer’s market – oversupply due to reduced demand – quickly.

Real estate agents say bidding wars are already less in parts of the city.

But predicting the housing market is tricky and timing your decision to buy a home now while interest rates are rising and there are too few bids, or waiting two months in the hope that prices will fall further, is a risky game.

It has to do with your personal financial situation, says Murtaza Haider, professor of data science and real estate management at Toronto Metropolitan University.

People with high incomes and big stocks will not be deterred by high interest rates. But those with income and equity are less vulnerable to small movements in interest rates. With higher interest rates, it affects what potential buyers can qualify for, and thus leads to the bank being given a smaller loan, he says.

On April 13, the Bank of Canada raised the overnight interest rate by 0.5 percent, after a 0.25 percent rise in March, with another big jump in June. Major Canadian banks raised their key interest rate to 3.2 per cent affecting both fixed and variable rate mortgages.

“If you are immune to interest rate changes, now is the time to buy, but if not, you need to seriously consider whether this is the right option,” Haider says.

After assessing property cycles over decades, he says, it’s impossible to predict the exact moment when prices will rise or fall.

“You either wait too long or you jump in too soon,” he adds. “There is never a good time. It is only when your financial circumstances allow you to buy.”

Wins Lai, a Toronto real estate broker, says that when thinking about buying a property, it’s important to ask yourself, Do you have enough savings for a down payment? Is your business stable? Are you currently renting or living in the house?

“If the answer is yes to all of these questions, now is the time to buy. But it really depends on your personal schedule and if you really need that investment.”

Lay says the current market has fewer bidding wars that allow potential buyers to enter conditional offers such as ordering a home inspection and securing financing.

In a hot market, there can be up to 20 bids on a home, so potential buyers are more likely to opt for a preemptive bid, which means there are no or very few conditions attached.

Real estate agent Mark Campbell says that even with fewer bidding wars and more conditional offers, the refrigeration market is worrying some buyers and sellers.

“I have some buyers and sellers who have gotten off their horns In a little while, waiting to see what happens.”

As more listings become available, people are hesitant to know where the housing market will be headed in the next few months.

Low bids mean sellers may hesitate until prices go up again. Campbell says that if potential buyers are buying a property now, but home prices are dropping further, they could face a mortgage shortfall in a few months when closing day approaches and their home’s value plummets.

Phil Sober, president of Royal LePage, says the psychology of buyers and sellers during a correction in the real estate market goes through waves.

With interest rates rising to pre-pandemic levels two years after their historic lows, it’s natural to be uncertain, he says.

“You’ll see sellers and buyers not sure what to do next,” he adds.

Super says that although sales have fallen dramatically, prices haven’t followed the same path.

The main reason for this is the short supply of housing. Even with more listings on the market, Canada is short of 1.8 million homes. The federal government is taking action but it will take years to fix this “serious social problem,” he said.

“The vacancy rate to buy or rent is still tight. This shortage boosts the value of homes.”

He has seen correction periods in the housing market again and again – in 2009 after the recession, and 2012 and 2018. He adds that the housing market always goes up and down.

In the spring of 2020, home prices fell by six percent. Many of those who bought real estate in December 2019 wished they had only waited six months to buy it. But by the end of 2020, prices have risen dramatically.

“Trying to time the market…it will just tie you in knots. If you don’t buy at the bottom of the price drop, it will be wiped out in months (as prices are rising rapidly again). What are your financial strength and needs? Judge accordingly,” he says. Super.

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2022-05-13 21:14:17

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