Wondering If You Should Purchase A Property Now Or Wait?
Should You Buy a Home Now or Wait for Prices to Drop? A Deep Dive for Home Buyers
For anyone thinking about buying a home, one of the biggest questions is timing. In the unpredictable world of real estate, where prices can soar to new heights or dip unexpectedly, deciding when to buy feels more like fortune-telling than a financial decision.
But let’s demystify this a bit and break it down in a way that makes sense, especially for Canadian home buyers.
The Market is Complex – But Not Impossible to Read
Real estate is influenced by a variety of factors, including interest rates, economic conditions, government policy, housing supply, and buyer sentiment. Predicting exactly what will happen next is tricky, but we can take a good look at the trends and make an informed decision about whether now is the right time to buy.
To answer the question of whether you should buy now or wait, let’s explore several key factors impacting the current housing market and what they mean for you as a potential buyer.
1. Interest Rates: The Silent (and Loud) Game-Changer
Interest rates are perhaps the biggest determining factor in what you can afford to buy. When interest rates are low, borrowing money is cheaper, and your mortgage payments will be lower. When rates rise, it gets more expensive to borrow, and your monthly mortgage payments will increase for the same loan amount.
Over the past year, we’ve seen an upward trend in interest rates in Canada as the Bank of Canada raised its benchmark rate to curb inflation. The overnight lending rate now sits much higher than a few years ago, impacting mortgage rates. Many buyers, especially first-time buyers, find themselves squeezed out of affordability because of this.
Should You Wait?
Here’s the conundrum: while it might seem like a smart idea to wait for interest rates to drop, no one can guarantee when that will happen—or if it will happen anytime soon. The Bank of Canada has made it clear that inflation control remains their priority, which could mean more rate hikes or prolonged higher rates.
Waiting for interest rates to drop could backfire if rates remain elevated for a longer period than expected. Alternatively, buying now locks you into today’s rate, and you could refinance later if rates drop.
Prediction: If you wait, you may not necessarily benefit from lower interest rates in the near future, and home prices could also rise while you’re on the sidelines.
2. Home Prices: Will They Drop Further?
The big question: Are home prices in Canada going to drop further? The answer is nuanced. In some cities and regions, we’ve seen home prices stabilize or even decline slightly. The Toronto market, for example, has experienced some cooling from the highs of the pandemic boom, but prices are still much higher compared to pre-pandemic levels.
According to the Canadian Real Estate Association (CREA), home prices were down nearly 5% year-over-year in 2023, reflecting a softening market. However, it’s important to note that this is largely region-specific. Some markets, like the Greater Toronto Area and Vancouver, are less likely to see steep declines, given the strong demand and low housing inventory.
Additionally, a shortage of housing supply and strong immigration targets (500,000 new immigrants per year) will continue to apply pressure to the housing market, supporting prices over the long term.
Should You Wait?
If you’re hoping for prices to collapse, that’s unlikely to happen unless there’s a significant economic shock (such as a recession). Even in a moderate downturn, price drops are often not as significant as buyers expect. Waiting for prices to drop significantly could mean missing out on current opportunities and having to buy in a competitive market once demand picks up again.
That said, in some markets, it may be worth keeping an eye on specific areas where overvaluation may still lead to further price corrections. Consulting a local realtor to stay informed on price trends in your region is a smart move here.
Prediction: Prices may stabilize or decline slightly in some markets, but waiting for a drastic price drop may result in higher competition and potentially higher prices later.
3. Supply and Demand: A Balancing Act
Supply and demand remain at the core of the housing market. In many Canadian cities, particularly in the GTA, housing supply remains tight, with not enough homes being built to meet demand. The combination of low supply and strong demand, fueled by immigration and demographic changes, has led to price increases over the long term.
Government policies, such as efforts to increase the housing supply through faster approvals and incentives for developers, will take time to have a meaningful impact. Moreover, zoning regulations and bureaucratic delays often hinder the development of new housing projects.
Should You Wait?
While governments at various levels are making efforts to address the housing crisis, these changes will take years to significantly impact the market. In the meantime, the imbalance between supply and demand is unlikely to resolve quickly. This imbalance tends to favour sellers and means that price growth will likely resume once the market stabilizes from current economic pressures.
Prediction: Supply will remain constrained for the foreseeable future, making it difficult for prices to drop dramatically. Buyers who wait may miss out on locking in a property before prices begin to rise again.
4. Your Personal Circumstances: The Most Important Factor
Now that we’ve covered some of the broader market conditions, let’s talk about what matters most: your personal situation.
Financial Stability
If you’re financially ready to buy, you should strongly consider moving forward. This means having a stable job, a solid down payment, and some financial cushion for unexpected expenses (repairs, renovations, etc.). If you’re not in that position yet, it might make sense to wait, regardless of what the market is doing.
Life Changes
Consider what’s going on in your life right now. Are you ready for the commitment that comes with buying a home? Are you planning to stay in the area for the foreseeable future, or is your career in a phase where you may need to relocate? Buying a home is a significant investment, and if your circumstances could change drastically in the next couple of years, waiting might be the safer option.
Prediction: If your finances are in order and you’re in a stable life phase, waiting may not offer any significant advantages. Conversely, if your situation is uncertain, it might make sense to hold off until you have more clarity.
5. Rents Are Rising
It’s also worth noting that if you’re renting while you wait to buy, rents in many Canadian cities are rising rapidly. According to Rentals.ca, the national average rent increased by over 12% in 2023, with Toronto and Vancouver seeing even higher rates of increase.
If you’re waiting for home prices to drop, you may be paying more in rent while also missing out on building equity through homeownership. Over time, renting can be more expensive than buying when you consider the opportunity cost of not investing in property.
Prediction: If you’re currently renting, rising rents might eat into your savings and hurt your buying power. Buying sooner allows you to start building equity and protecting yourself from future rent increases.
6. The Emotional Side of Homeownership
It’s easy to get caught up in market statistics and financial strategies, but it’s important to remember the emotional value of owning a home. Homeownership isn’t just about finances—it’s about having a place that’s yours, stability for your family, and a long-term investment in your future.
While there’s no denying that timing matters, it’s equally important to focus on how ready you are to become a homeowner and how much value you place on that stability. If you’re ready to take that step, waiting for the “perfect” time may not be necessary.
Conclusion: Buy Now or Wait?
So, should you buy now or wait for prices to drop? There’s no one-size-fits-all answer, but here’s a recap:
- Interest rates are higher than recent years, but they could stay elevated for some time.
- Home prices may stabilize or drop slightly, but waiting for a drastic fall is a gamble.
- Supply and demand imbalances in many Canadian cities suggest long-term price growth.
- Your personal situation is the most important factor. If you’re financially and emotionally ready, it might make sense to buy now and lock in a home at today’s prices and rates.
- Renting is becoming more expensive, and waiting could mean paying more without building equity.
In short, if you’re financially prepared and planning to stay put for a while, buying now could be the right move. However, if your situation is uncertain or you expect significant changes in the near future, waiting may be more prudent.
Ultimately, the best advice is to work with a knowledgeable real estate agent who understands your local market and can help you make the best decision based on both the market conditions and your personal circumstances.
For other great articles specific to buying a home, click here and check out these articles also!
- House Hacking Strategies To Get Into The Game
- Home Buyer Assistance Programs
- Waiting For Mortgage Rates To Drop
If you’re thinking about buying, selling or investing in Durham Region or Toronto, let’s chat! I can be reached at 647-896.6584, by email at info@serenaholmesrealtor.com or by filling out this simple contact form. You can also kick off your search for Durham Region homes for sale by clicking here.
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