A The Greater Toronto and Vancouver real estate sectors are well on their way to becoming buyer’s markets after seeing significant drops in home sales in recent years. The real question is: Do you want to buy at high prices with low interest rates or at lower prices with higher interest rates?
Sales in both regions plummeted by more than 40% from last summer and more than 20% from June this summer. Most people would worry about this statement. Sales drop does not mean prices drop. It means that you can negotiate better with the seller when you are purchasing. This is a huge benefit as you were not able to do this in the past.
Toronto’s real estate board recorded a 47% drop in GTA home sales in July, comparing to the same month a year ago and a 24% decrease from June of this year. Now the boards report sales and activity. What you should be concerned about is mortgage payments and home equity position. Now that you can negotiate a lower price home, even when your payments may be a bit higher, when the interest rates change again and start lowering, your equity will sky rocket as well as you may have the ability to reduce your payments. A real win scenario for you.
Vancouver’s board said GVA sales plummeted 43 percent from last July and 23 percent from this past June to reach 1,887 last month. In Vancouver the tricky part is to get you approved, but when you are, I’d negotiate the best price I can get (now that I can) and structure my mortgage in a way that when rates start to drop in the future, my payments will drop as well. At that point, my equity will increase a lot.
The increase in mortgage rates after Canada’s key interest rate rose by 1 percentage point in mid-July is said to be responsible for much of the moderation. It is the greatest increase the country has seen in 24 years. That has caused a lot of fear. Fear does not allow you to think. In my opinion this is one of the greatest opportunities to purchase a home.
The environment of rising rates has prompted people to reconsider their housing intentions. Buyers are waiting for a further drop they and brokers believe might take place in the fall, while sellers are deliberating whether to make the most of their home now or wait for the market to swing in their favour again. In my opinion, again this is a mistake. People are waiting for the real estate market to change and at that point, rates will be lower and prices higher, they will have missed the boat again.
‘It’s not a pessimism as much as it is a ‘wait and see’ attitude,’ says Sabrina Cameron, a Richards Group sales representative in Toronto, ‘People are unsure about what the future holds.’ When you have a long term perspective, all becomes clear. Ask yourself, if you bought today, even if temporarily there was a drop in prices. How much would that same home be worth in 20 years? How much of the mortgage would be paid off? How much would be your equity worth to you and your family?
People who are currently selling real estate are not those who are in distress. The buyers who are entering the market now and looking to sell first may be those who have invested money and want to know how much they will earn. Do not purchase a property for the seller, buy it for your family. I personally helped finance properties a few months before the mortgage crash in 2008 that took everybody by surprise. Today those buyers are sitting on huge equity (in the Hundred’s of thousands) and do not regret their decision at all.
Some sellers are finding that the bidding wars and frantic pace seen in the first half of the year and late last year have now dissipated. This realization has encouraged some to terminate their listings in order to benefit from the hot market. This also influence the statistics shown above. Think strategically long term and you will see the opportunity.
In June, the number of terminated condo listings in the GTA was 2822, a 643 percent increase from January’s 380 terminated condo listings, another statistic that creates fear and leads to inaction.
Just think about it. The rapid increase in prices (lead by the government cash subsidies and rapid lowering of rates) and now the rapid increase in rates that have softened the prices were disturbances due to COVID-19. Over the long term I’d say that prices will continue their long term trend. This trend has been upward for more than 30+ years.
Fear is what is driving most people’s emotions. If you do what other people are doing you will get the same results everybody is getting. When I talk to people very few think long term. Talk to any well off person and ask him if he takes decisions based on the short term or the long term.
However, Cameron said inventory levels would have to hit about six months’ worth of supply in order for there to be a buyer’s market. People being busy and sales being down haven’t yet converged to create a buyer’s market, Cameron said.
What I say is: do not take decision based on statistics that are meaningless to you and your family. Look for the right property at the right price at the right payment that works for you today now that you can pick and choose.
Then do not hesitate and purchase it. Then live in it happily for many many years. At that time you will not remember any statistics. You will only know you have equity in your home that belongs to you.
Banks still have the liquidity to provide mortgages, but prices are taking longer to fall in the current environment, which has a near 40-year high inflation rate, a labour shortage, and higher loan costs, Haider explained.
My advice #1: Think long term
My advice #2: Do not make your real estate and mortgage decisions based on the news.
My advice #3: Do not follow the herd.
My advice #4: Look at your emotions and Think.
My advice #5: Think about your payment, your perfect home and the equity you will own in 20 years.
My advice #6: All news about the future are opinions, not facts.
My advice #7: Listen to the advice only of people who have real experience on the subject matter. In today’s world anybody can give advice and that is very dangerous.
My advice #8: Do not wait to buy real estate. Buy real estate and wait.
My advice #9: If you are renting, purchase a home.