The Things Buyers Need To Consider Right Now
Part 3 of a 5 post series
Surprisingly, I think I have shown more property in the last month during this “slow-down” than I have in any other month of this year. People WANT to buy but they are afraid so many are taking a wait and see approach which is in turn creating a backlog of pent-up demand as mentioned in the first post of this series.
I like that people are taking the time to really think about what is right for them rather than rushing headlong into decisions. Here are some of the things buyers should consider:
Wait and See: As of the end of September, prices in the Georgian Triangle had not dropped and in fact, they still went up in all areas except Collingwood where they moderated slightly. I really do think they will come down in some areas but the question is, by how much? Wouldn’t we all love to know that!
If you are currently renting, take into consideration the cost of rent. For example, if you are paying $1200.00 a month to rent and wait a year to buy a home, you will have spent almost $15,000 on rent during that time. Chances are that house you are dreaming of will not go down $15,000 in value in one year. Possible yes but the chances are very slim. It’s also likely that interest rates will be higher in a year and, if the market comes back on strong, there will be more competition from other buyers.
If you are considering the purchase of an unfinanced vacation home, it may make sense to wait a little to see if there are some bargains brewing over the winter months.
Inventory: Right now, new listings are still coming on the market but history shows that this will naturally decrease over the winter months. Inventory also tends to drop off sharply right before a market recovery. Urgency and multiple offers are gone from the market so this may be a good time to consider buying if the right property comes along.
Interest Rates: This is a very important and under-rated consideration. It’s what decides the bottom line of what goes out of your pocket each month. I would suggest you go to your lender and get pre-approved for financing and, don’t over extend your comfort zone. Common thinking at the moment is that rates may go down in December and then start to climb as recovery sets in. House prices are not the only thing to watch.
Investment Property: In our area, the ROI (Return on Investment) and the Cap rates have not been great for several years with prices now 15% above 2005 levels but rents nowhere close. Reduced prices, anxious sellers and decent interest rates increase opportunity at a time like this. You also need to watch interest rates closely. With so few income properties on the market, it doesn’t make sense to wait if the right thing comes along where the numbers work for you.
A point to ponder: Many retirees are in a panic at the moment as their life savings in their stock portfolios are dropping on an almost daily basis. What if they had all purchased an income property 15 or 20 years ago and had it paid off? Today, they’d be collecting a rent cheque from the tenants every month no matter what the stock market or real estate market does. It’s exactly what John and I are doing to save for our own retirement.
The Bottom Line is that you are not buying a house in the U.S. You are buying a home that eventually you will pay off no matter what happens. Be mindful, consider all the options and take your time. Look for opportunities and be prepared.
Next in the series: Are We Close to the Bottom of This Real Estate Market Cycle?
When it’s time to buy or sell real estate in the Collingwood, Blue Mountain or Georgian Triangle area, contact Marg, an experienced and competent Broker who’s ready whenever you are!