The Perfect Storm for First Time Buyers?
Have you been waiting to jump into the market? Still on the fence about when is a "good time to buy"?
This week, the Bank of Canada dropped its key lending rate by 0.5% to a 50-year low of 1%. This means that Prime is now at 3%, and the variable rate is between 3.8% and 4% depending on the lender. For every $100,000 of mortgage loan amortized over 35 years, the payment varies between $430 and $440 per month.
As many of you have been watching on the news, housing prices are down (shocking, I know). The benchmark price for detached and attached properties is down about 11.5% over December 2007. The benchmark price for apartment properties is down only 7.4% from December 2007. After seven years of consecutive record-breaking price increases, this drop in prices is welcome relief to buyers watching affordability pass them by. It won't last. In the real estate cycle, a market like this is like the "perfect storm" for first-time buyers.
Here are my top 5 reasons why I think this is your year to buy:
1. Interest rates are at historic lows - while banks have tightened their lending regulations, mortgage brokers are working fantastic deals for people every day. Sometimes your mortgage payment will end up being less than your rent.
2. Many property owners that have their homes listed right now NEED TO SELL. Buyers have so much negotiating power today, and this is a very good thing for you!
3. Buyers, for some reason, love to buy in a Seller's market. Why? Who knows! The "Everybody's buying, so I have to buy too!" mentality is the wrong one. Be a leader and get the deal! Follow and you will pay more. It's a fact.
4. The number of listings is dropping. When supply shrinks, demand increases. In some areas, prices have ALREADY started to go up. Don't wait until it's too late!
5. Right now, there is less pressure. If you are new to the home buying process, you have time to look, to learn and to breathe before you make one of the largest investment decisions of your life.
Keep in mind: If we could all predict the "bottom" of the market, we would all be rich. The best you can do is take a leap of faith and work with your Realtor to negotiate a good deal.
With the snow (almost!) melted and the sun shining (through the fog!), now is a great time to get out there and see what your options are. The first step in the home buying process is always to get educated. I'm always here to answer your questions and explain the home buying process in a simple, easy-to-understand format. Let's have coffee! Another piece of advice I would give is to chat with a mortgage broker. It costs you nothing, and they will give you a good picture of what you can afford - I bet you'll be surprised!