As mortgage rates continue to rise in the U.S. and Canada, the demand for housing has fallen. The problem is, the supply of homes hasn’t caught up making home prices still pretty high. Is this the right time to unload and/or buy property? Or should one wait for supply of homes to increase and prices to go down further?
What goes up eventually has to come down – No good thing lasts forever, which includes real estate market bull runs. The price correction that people have been waiting for has now arrived, except it’s not as dramatic as some may have hoped for. There were sufficient warning signals for people to cash out early this year as the Bank of Canada and U.S. Federal Reserve have been announcing impending mortgage interest rate hikes since 2021. When will the market bottom out, though? No one will know for sure. Not even the most savvy real estate investors. What IS for certain is that the market correction has already begun, with price of real estate already softening and bidding wars subsiding. Property prices have yet to hit rock bottom. So although there’s still time to sell (and make some money although not as much as before), the present is not the time to be looking for bargains just yet as the amount of listings remains low and property (in particular single detached homes) are still being listed above their assessed value although it’s taking longer for them to sell. But it’s not yet a buyer’s market by any means. Not yet anyway.
- Wait for more supply – Does it make more sense to wait when there’s more available supply so you can find something you really like rather than settling for something you don’t? Here’s an interesting thought: What if supply doesn’t increase and people continue to sit on the fence to “wait for things to get better” as this article illustrates? That means that if supply of property increases only by a little and still remains tight, you’ll have a unique situation on your hands: (a) property prices that are still out of reach and (b) even higher interest rates, which is a terrible combination. Waiting certainly can reap some benefits. Except remember that if you’re a seller, you probably wouldn’t unload property prices when prices are softening and borrowing costs are climbing. The only reason to unload property now is to completely pay off some (or all) of your mortgage debt so that you don’t have to make heftier mortgage payments once interest rates go up. The problem with sellers sitting on the fence en masse waiting for a better time to sell is that property prices will stay unaffordable preventing the much anticipated “crash” in the property market.
- Buy when the time feels right – The long and short of the matter is, just buy when the time feels right for you whether that’s now, in six months or even a year from now. If you wait long enough, there could potentially be a loosening of supply and more properties to choose from. Or not. Check out what’s happening in Vancouver, where supply remains tight or in Toronto, where supply of homes remains the same as of this time last year. At the very least there will be greatly reduced (or even zero) competitive bidding as interest rates go up. If property listings increase, you may find something that you truly like rather than being forced to buy one that you’re not too crazy about just because 4 other people are also bidding on it. Although you still may be approved for a mortgage now compared to later down the road you still don’t have as much choice. If you want a bit longer, you may have more choice but you may not be able to borrow as easily especially if lending standards become stricter (as they surely will). If you’ve got cash and don’t need to borrow from the bank for a real estate purchase, you should definitely wait for more (and better) listings to come out. Except you will most likely have to sell your house for a bit less, as property prices soften further.
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