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For several years we experienced some pretty crazy home prices across the country (especially in a few markets), that made buying a home almost impossible for many. So now that home prices are falling, is it a “buyers” market and a good time to buy? That’s the looming question in many potential homeowners’ minds. Unfortunately, none of us have a crystal ball, but we can make informed decisions.
You are reading: The housing market roller coaster
In today’s market, many factors at work lead to both buyers and sellers being apprehensive about making significant decisions. For sellers, not only are prices lower compared to last year but there are fewer buyers to create competitive bidding, so many potential sellers are waiting to list their homes.
For buyers, house prices are coming down, which is good news, but mortgage rates are rising so fast that affordability is just as big a problem as before. When we add high inflation to the mix and see our basic costs rise rapidly, it is still a grim picture for many.
The other concern is if you purchase a house today, in a cooling market will your home be worth less in a couple of months? Will you recoup the money that you paid? Many homeowners rely on home equity as part of their retirement plan or even for daily living, so it is essential to understand the long-term effects of buying today instead of tomorrow.
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The most recent Bank of Canada interest rate increased to 4.5 per cent, the highest since 2007. Higher interest rates mean you will spend more monthly on your mortgage, especially for homeowners with variable-rate mortgages. They will feel the pinch, even if house prices decline. They may have to sell because they cannot keep up with the increases.
It’s not just your mortgage that will be affected. For example, many homeowners who plan on financing renovations through their line of credit will also be affected and may put off doing home renos. In the long run, locking into a variable mortgage rate might be the best choice since many are hopeful that this is the last rate hike for a while.
Many people still want to buy a house, but affordability is very low, especially for those trying to enter the market. Most experts predict that house prices will continue to fall in most major markets but agree the bottom is very close.
A softer housing market could also be good for some contractors, as they can play catch up after the renovation frenzy of the past couple of years. Still, other contractors are getting fewer jobs than they had hoped, as homeowners are cautious about how they spend their money.
Home-renovation contractors may be having a slightly easier time than new home builders as some of my builder colleagues have seen significant slowdowns in new projects.
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Homeowners who decide to stay in their home should get a home-maintenance inspection while they wait for the market to shift, especially if they didn’t get one at time of purchase or if it’s been three years since their last one. I recommend homeowners get such an inspection once a year as part of their home-maintenance plan.
If you are going to sell, you want the home to be in its best possible shape to attain the best price. A home inspection will highlight the major and minor deficiencies in advance of selling your home. I recommend discussing the inspection report with a contractor and consulting with your real estate agent to decide what repairs or changes will increase your home’s value.
A home inspection as part of the house-buying process has been off the table, particularly during the recent “HOT” market. Now, during this cooling period, I hope purchasers and sellers consider getting one, as it saves you many headaches in the long run.
Experts predict it will likely remain challenging for many first-time buyers to enter the housing market. However, some buyers may feel more comfortable once interest rates stabilize. Many experts say the home market won’t recover until 2024, when prices start to rise, and sales pick up nationally. Interest rates will be more stable by then, and inflation should have decreased.
The economy should grow as immigration fuels population growth and raises housing demand. Prices will rise as a result of increased sales. However, affordability problems will continue to plague the housing market. Higher prices could be weaker than anticipated if interest rates and an economic downturn cause significant amounts of forced selling.
I don’t have a crystal ball, but investing money and maintaining your home makes sense. If you look after your home, it will benefit you and your family for years to come.
