With the cost of real estate at record highs in Canada, you’d be forgiven if you decided to sit on the sidelines. No one can predict what will happen with prices, but what we can do is be smart about how much money we borrow. Buying a home will be the largest purchase of your life (hopefully), so take the steps to educate yourself before jumping into the markets.
If you’re ready to buy, timing the market (like investments) is never a good idea, but when it comes to real estate there is a bit of a competitive advantage to being a seasonal spender. The best time to buy a home in the Greater Toronto Area is January when the average sold price is $43,000 less when compared to the rest of the calendar year; this according to TheRedPin, the largest online real estate brokerage in Canada.
The biggest reason for the price decrease comes from supply and demand. The basics of supply and demand apply to any market—whether it’s about fruits, cars, Twitch views, or even real estate.
Most people don’t exactly get excited about buying a home in the middle of winter, especially after the high of the holidays. It’s a lot easier to look for a home in the spring when the weather is better and the days are longer. Of course smart buyers see this as an opportunity since fewer buyers means less competition.
A good real estate agent will usually advise their clients to hold off listing their property until the spring when the market picks up, but in many situations the sellers may not have a choice. With homes in January taking an average of 7 days longer to sell versus the rest of the calendar year, homeowners may take less than asking just to complete the sale.
It’s not just the weather that are holding buyers back. January is when we get all our credit card bills from the holiday spending season, and that may cause some potential buyers to rethink their timelines. Despite what your mortgage lender may tell you, it’s not exactly a great idea to shop for a home when you have a high amount of consumer debt.
Toronto has become famous for real estate bidding wars, but when there’s less buyers, presumably there’s a less likely chance you’ll end up in that scenario. Even if you can’t avoid a bidding war, you can reduce the amount you spend compared to other months.
Read About : Earnest Money Guide for the First Time Home Buyer
Being a responsible buyer
With the minimum down payment requirement increasing next month, some people believe that they must rush into the market right away. This is a silly way of looking at real estate especially when you consider that the new changes are on a graduated level, and only kick-in if you’re buying a home with a value of more than $500,000. The reason these new rules are being introduced is because there’s a real worry that some Canadians are spending too much on their homes.
How much is too much differs for ever single person, but what you should consider is how the size of your mortgage will affect your lifestyle. That mortgage may seem affordable on a monthly basis, but what will happen when interest rates go up? I realize that the odds are that rates will go down before they go up, but you should always future proof yourself.
There’s always going to be some overlooked costs of buying a home, but you should never forget about saving. More and more people are entering their retirement years while still holding mortgage debt. Well unless you have a defined benefit pension, there’s a real worry that you could run out of money – even then a DB pension may not cover your lifestyle. Always consider all costs when buying a home.
Statistics show that the best time to buy a home in January, but I wouldn’t get too upset if you’ve missed this window. I’d be more concerned about knowing your budget and sticking to it. It may be tempting to go over budget to get that dream home, but it may not pay-off in the the long run. Find a real estate agent who understands your needs and is working for you (as opposed to someone who just wants a commission).
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