Have you been thinking about taking the next step and buying a home? Whether or not you are currently struggling with debt and even if you have bad credit - if it is a goal of yours to buy a home in the foreseeable future – then being aware of the current housing market across Canada as well as in your region, will play a very important role in this process.
If you have been debating with yourself if it is the right time to buy a home – read on and decide for yourself if the climate of the current housing market will in fact be kind to you – or if it may not be the best time to move ahead with this purchase.
An Overview of the Current Housing Market in Canada
While in other parts of the globe, such as the Unites States – there has been a somewhat slower upward movement of home prices, in Canada these prices have been steadily increasing for some time now. With that being said, not all home prices have been as consistent in all parts of the country. While some provinces and cities have not experienced quite as much growth, including some areas more closely situated and linked to the oil markets – Alberta and Saskatchewan for example, the major cities that have continued to experience an even higher spike in the value of homes, include Vancouver and Toronto.
Where is the housing market going in 2016?
With the way 2015 has continued to boom- there have been widely-made speculations that the housing market will begin to experience a ‘cooling off’ at some point in 2016. These assertions have perhaps been based on the fact that the interest rates are likely set to rise this next time – as opposed to the ‘surprise’ that was stirred up when the Bank of Canada lowered them again only a few short months ago.
Will the Interest rate rise in 2016? . . .
As the soaring housing market is typically driven by various factors such as the rise of employment rates, income levels and of course a lower interest rate- that being said, if either of these categories are to experience a significant shift – then it may also be just as likely that the value of homes could in fact experience a bit of a decline. Therefore – with a higher interest rate, perhaps an inevitability in 2016, this could cause home buyers to change their course of action – opting to buy a home now – or to wait and see what happens in the months to come.
Reasons for Buying Now versus Reasons for Buying Later . . .
First time Buyers
For first time home buyers who are currently having difficulty entering into the property latter due to extremely high home prices – a higher interest could drive down these prices – making it somewhat easier to afford the cost of a home, compared to how things are currently standing price-wise.
However, another way to look at it is that while interest rates are still lower – perhaps applying for that home loan may be more achievable and manageable with a lower interest rate – and lower monthly payments to also be factored into the overall affordability – even turning it into a buyer’s market?
The possible downside of jumping at a loan opportunity while the interest rate is low however, is that you need to be sure you can handle that additional debt moving forward. If you are rushing into a decision because of the lower interest rate – then it could turn out that you may not have thought the situation through as thoroughly as you should. In the event, the rates go up which is fairly likely you may end up having to pay more , especially if you have gone with a variable rate mortgage.
As I’m sure you know this is a huge financial decision that you want to be prepared for. In the end, when all is said and done – even with a lower interest rate – if you are requiring a very sizeable loan to buy a highly valued home – then in all reality this still may not be an affordable outcome for you down the line.
Previous Home Owners
For previous home owners, the highly valued housing market may actually present an ideal time for you to sell and buy another home. If you are able to benefit from the current equity you have in your home, then selling and buying now – with lower interest rates still sticking around – you may find this is an affordable choice for you moving forward.
Now with that being said, should the housing market see the value of homes decline in the near future, this of course means that your new home will be less in value as well. If you are planning to stay in this home for the long-term or for at least several years – you never know where the housing market will be then, so perhaps that is less of a concern for the time being. You also may have plans to upgrade your home and grow more equity through this purchase – so opting to buy a home now may then work to your advantage.
Looking back on previous 2014 and 2015 home buyer patterns, these figures continued to reflect a realization that buying a home before the interest rates rise is the best method of securing a more affordable home and mortgage. However, over the course of the past 12 – 24 months many Canadians have suspected that interest rates would increase and this perhaps contributed to this ongoing behaviour and this ‘frenzy’ to buy now versus later.
Alternatively, while the housing market may slow down or experience a cooling off period – we are still not likely to witness a full-on housing market crash. The housing market in Canada has proven itself to be quite resilient in the face of other market fluctuations – and therefore even if interest rates do rise sometime in the new year – perhaps they won’t increase too much and the housing market may continue to see a continued vitality in Canada.
Therefore, according to this take on the housing market – home owners should not feel rushed into buying or not buying. While you may want to hold off to see if the overall value of homes will go down somewhat, on the other hand you could instead opt to take on a mortgage now while the interest rates are a bit lower – and either scenario may be beneficial for you.
All in all, as a potential home buyer you have to do what is best for you. What is really comes down to is the necessity for performing an assessment of your current financial situation. In turn, if you feel you will be able to afford to make your payments in light of the current and forecasted interest rates, then perhaps taking that next step and buying a home now may be a realistic and financially sound choice – and one that will mark the beginning of a new and exciting chapter in your life.
