Last month I sent out a harmless Tweet… or so I thought. Instead it led to a heated discussion about Canada’s favourite dinner table topic – real estate.
Real estate is a popular topic of discussion these days. Everyone and their brother seems to have an opinion on it. It’s not hard to see why. Buying a home is most likely the single largest financial transaction of your lifetime. When you buy a home, you’re making a big financial commitment.
Your priorities change when you become a homeowner. Paying your mortgage becomes your number one priority. Buying a home often makes you more financially responsible (as long as you don’t use it as your own personal ATM).
So, is now still a good time to buy a home? If you ask the people around you – family, friends, coworkers and neighbours – you’ll get an interesting range of opinions (often pessimistic). The real estate market is overheated, we’re heading towards a bubble, housing is too expensive, it’s better to invest your money instead – are some of the opinions you may hear.
But similar to how you shouldn’t take stock picking advice from your cab driver (unless he’s a distant relative of Warren Buffett), it probably doesn’t make sense to take home-buying advice from armchair economists. Buying a home is generally a good long-term investment. It offers many benefits – it’s tax-sheltered, it can generate rental income and the government offers tax credits.
If you’re financially ready to buy a home, now is the perfect time, especially if you’re in Toronto. We have record low mortgage rates – these likely won’t last forever.
The Toronto Real Estate Loses Steam
An interesting thing is happening right now in the Toronto real estate market. For years Toronto was a full-blown seller’s market. Whenever a home would go up for sale, no matter its condition, most of the time it’d get 10 to 12 offers. That’s quickly change – what a difference a couple months makes.
The Toronto real estate market started to turn the corner in March when home prices soared 33 percent year-over-year. This prompted the Ontario Liberals to step in with its 16-point plan aimed to cool the housing market. Although there weren’t any significant policy changes in the government’s plan (besides the foreign buyer’s tax), there was certainly a psychological change. It has had an immediate cooling effect on the real estate market.
Something interesting happened in the weeks that followed. Many home sellers flooded the market with new listings, looking to cash out at the top of the market. This trend doesn’t look to slow down anytime soon. According to a survey by the Toronto Real Estate Board, 30 percent of households in the GTA say they’re likely to list their home in the next 12 months. The main reason? Government intervention.
The surge in listings has left home buyers with plenty of choices in their desired neighbourhoods. But instead of buying their dream homes, many buyers are choosing to sit on the sidelines, spooked by all the talk of a housing bubble. This is backed up by a recent study by TransUnion Canada that found that more than half of millennials said that the headlines around house prices are making them worry about their future home buying potential.
What’s a First-time Home Buyer To Do?
If you’re a home seller, unless you enjoy selling your home at a discount, as I mentioned in my Tweet, my best advice is to not sell unless you have to. Wait six months to list your property when the real estate market has hopefully recovered.
— Sean Cooper (@SeanCooperWrite) June 27, 2017
This presents a unique opportunity for first-time homebuyers looking to get into the real estate market, but many aren’t jumping at the opportunity. Although I don’t have a crystal ball, my gut feeling is that this is a temporary lull in the Toronto real estate market (similar to Vancouver) and things will pick up in the fall.
If that’s the case, you’ll be kicking yourself that you didn’t buy a home when you could afford to. Many sellers who are listing their homes and not getting the prices that they want are choosing to take them off the market. The ones who are leaving their properties up for sale are the most motivated to sell.
Now could be your best chance to buy your dream home at a discount. Take advantage before your window of opportunity closes.