In my time as a mortgage broker, there have been many instances when I have been asked “Is it a good time to buy a home?” If you were to hear the words of many Realtors, you would hear the words “Its a great time to buy a home”. This may sound self serving, and to some extent, that may be correct. The subject of this post is to dig deeper as to when it is a good time to buy, and what constitutes a good time to buy a home.
The first thing I would do is understand what the question means, which can vary depending on the person’s individual circumstances. That question could mean “Is it a good time FOR ME to buy a home?”. The question could also be “Is the current real estate market a good market to buy a home in?” or “If I buy a home now, can I make money on it when I sell it?” I will deal with these last two questions primarily.
The answer is that no one has a crystal ball to know exactly when to time a real estate market for maximum profitability. Some people have lost money on real estate, and some will in the future also. However, most people do make money in general, in Canada. I feel far more confident in recommending the real estate market compared to the stock market.
The objectives of the decision also matter as to when it is a good time to buy a home. Real estate is commonly considered to be a long-term investment. If you purchase a property as a short-term investment or “flip”, you had better hope that it is a sellers market until you sell the property, and if not, you better be prepared for the possibility of it becoming a long-term investment.
If you are buying a property as a residence, and for the longer term, such as at least a 3-5 year investment, you will most certainly be ahead when you sell, not just for home value purposes, but for paying down the mortgage, increasing equity, and enjoyment of a residence that is impossible to put a dollar value on, but may be the best reason of all to buy a home. In those circumstances, I will drink the cool-aid, join the choir, and say “It is a great time to buy a home”. Given that it is difficult to know when to time the real estate market, you could speculate that the market will be due for a downturn, and could miss out on significant appreciation in property values, as clients I have met over the years have.
Last year, I had believed the market was due for a downturn. The last two years, each September, the federal government had announced new changes in regulations regarding mortgage lending. The Chinese government was cracking down on the outflow of capital from China. Prices had gone up and up, and we are in the most expensive market in Canada, and one of the most expensive markets in the world. Further, the banks have FINALLY started to make 35% down-payment, no income, no credit, foreign buyer/new immigrant mortgages more difficult to obtain (no thanks to the federal government).
Something was going to break sooner or later. It is now in the breaking. If you had bought in September of 2017, depending on the type of property and neighbourhood, you might have lost a bit of value by now, or you may have had a slight appreciation in value, but in another 3-5 years, it is highly doubtful, in my opinion, that if you sold your property that you would sell it at a loss. As such, it was not the worst time to buy, and now that the market is cold, you have more choices and more room to negotiate the best deal possible for yourself, and possibly at a discount to what you would have paid last year.
The next question is when is it a good time to sell? If you are moving up to a larger or more expensive property, a down market is a good time to sell as you would probably get a bigger discount on the purchase than the loss on the sale, but a hot sellers market is OK also. If you are downsizing, holding off on selling could be good, but then you are facing an upward and competitive situation when you buy and you may not like your options as much.
In conculsion, yes, it is somewhat self-serving to a mortgage broker or Realtor to say it is always a good time to buy, but other than for short-term gain, I would agree with it, and while I am a mortgage broker and Realtor, I have at least clarified the reason with an explanation.
The only other element that you should consider when buying a home is if you can qualify, and for how much you can qualify for. To get an answer to that questions, give me a call at 604-318-1292. I would love to discuss your options with you.