Have you been browsing real estate listings, driving by homes for sale, or even visiting open houses with the dream of becoming a homeowner? If you’ve been putting off buying a home in the uncertain economic landscape, now may be the time you’ve been waiting for. After years of a seller’s market where it was difficult and sometimes impossible for buyers to find their dream home, the trend is shifting in the buyers’ favor. A local real estate agent can help you navigate these trends and find the right home.
Why Now is the Time to Buy
Home buyers may be aware that the Bank of Canada raised its benchmark interest rate to 3.75 percent, which reduces affordability. What they may not realize is that some changes in the housing market are beneficial to them. After a couple of years where homes went off the market just days after being listed, they are now sitting on the market longer. Instead of selling in days or a couple of weeks, you see homes in some areas listed for more than a month.
With it taking longer for the properties to sell, it leads to the seller lowering the price. Price reductions help out buyers who may have a tight budget. Rising prices have made everyone’s budgets tighter, which may mean that homeowners decide to sell if they have more homes than they can comfortably afford. More homes on the market also lowers the price, benefiting buyers.
The Bank has raised its benchmark rate six times since March. With higher rates, buying a home today is often less appealing and more expensive than a couple of years ago. This leads to fewer buyers feeling confident in making a significant investment now, knowing that a recession could lead to job loss and even tighter finances.
Fixed vs. Variable Mortgages
If you're one of the home buyers looking for a property amid economic uncertainty, it's important to know which mortgage options are available as you try and figure out which is best for you.
A fixed mortgage rate stays the same throughout the length of your term. A variable mortgage is immediately dependent on the Bank of Canada's rise and fall of interest rates. In the second half of 2021, most Canadians opted for a variable loan, but that has since changed.
Buying a home, and choosing the right mortgage, is a deeply personal decision. It entirely depends on your goals, your unique financial situation, and how comfortable you are with risk.
Ways to Reduce the Cost of Buying a Home
You don’t have to let the rising interest rates keep you from buying a home now if you’re ready. You can take steps to make it easier to get an affordable loan. For example, make sure you have excellent credit to get the best interest rates. Come up with a larger down payment to reduce the interest rate on your mortgage. Because you’re assuming more risk, lenders are often willing to negotiate.
Fewer buyers are willing to waive real estate contingencies, such as not having a home inspection. Sellers also set up contingencies, such as having financing in place before putting in an offer. All these real estate contingencies limited the pool of buyers competing for the same property. With the loss of these contract contingencies, it has leveled the field for all buyers.
If you’re a first-time buyer, you have access to various first-time buyer programs. These programs provide you with assistance for your down payment. Ask your real estate agent for details that will help make your home more affordable.
Home buyers can take advantage of the changes in the market if they are willing to adjust their expectations. You may need to consider living in another area or a smaller home if you want to buy now. Your real estate agent can help you find an affordable home that will suit your needs.