In Ontario, the real estate market has taken a complete 180 degree swing in the last 12 months. From the Peak in most major markets in February and March 2022 to sale prices crashing at the start of 2023. But has this made housing more affordable?
My answer, no, for now.
For First-time home buyers, affordability is the #1 challenge. Yes, housing prices dropping 20-25% in 10 months soun
ds amazing... but the borrowing costs also went from 2.5% to 5.5% in this same time frame. Consider this:
Using the Hamilton Real Estate Stat
istics, due to higher volume of sales, and better accuracy. RAHB Market Statistics.
20% Down payment = $204,277
20% Down Payment = $150,322
Interest Rate: 2.55%
Interest Rate: 5.55%
Represented above, the tables shows that affordability has not gotten any easier but more challenging for First-time
buyers and buyers in general with the fast interest rate hikes.
How to Prepare yourself
1. Get your Budget and Approval In Order
Understand your budget and what you can afford. In March 2023, we are coming into more certain times that the interest rate hikes may be slowing. But you need to understand how much you can afford by getting your pre-approval.
2. Have enough money t
o consider all closing costs PLUS the unknown
Closing costs in Ontario can be fairly expensive. You must consider Land Transfer Tax, Legal Fees, Title Insurance, Home Insurance, Utility Deposits, Moving Expenses. But understand that things will go wrong. Have a Household Emergency Fund to ensure you have enough money to pay for the unknown costs/repairs.
3. You DON'T need 20% down payment
Speak to your mortgage broker and if you do not have the 20% to avoid CMHC mortgage insurance that may be alright and purchasing a quality home and paying CMHC may be worth it with the appreciation of home prices over the next 5 years. As many say, "Time in the market is better than TIMING the market"
Discuss the interest rate options with your mortgage broker/bank. In most case, CMHC insured mortgages carry a lower interest rate, compared to uninsured (20% down or more).
4. Select and be strategic about the neighbourhood, city, location
Selecting a neighbourhood that suits your needs right now and in the future is crucial. Almost anything can be altered or changed inside of a home. The location cannot.
My tips to buyers is consider your commute to work, friends and family, then finally the everyday essentials and make sure those work for you! Consider the closest hospital, fire station, grocery stor
e, etc. then find the house that fits your needs.
Is Real Estate a good i
nvestment right now, if you can afford a particular property and plan to hold the property for the long-term (3+ years) yes you will see positive growth. Interest rates will not stay this high forever, so if you can secure the perfect home, and weather the storm of high interest I think Real Estate will be an amazing investment for you long-term.