Trying to get the timing just right when buying a house can feel a little like trying to win the lottery. If you’re lucky, you’ll find a great home for the right price at a decent interest rate. However, buying a house successfully has more to do with strategy than luck. The key is to operate under expert guidance while being armed with accurate and up-to-date information.
When you know the market and your advantages within it, you’re in a better position to buy when the time is right for you rather than waiting on the sidelines for outside factors to change. In this post, we’ll explore the ramifications of buying now versus holding off for a lower rate.
Housing Prices and Interest Rates
In many cases, there tends to be an inverse relationship between housing prices and interest rates. Low rates can trigger massive demand, which causes housing prices to rise. This is the exact scenario that happened from 2019 to early 2022 as buyers took advantage of historically low interest rates.
When rates begin to rise, housing sales typically slow down, resulting in lower prices. It may seem like a Catch-22 where you pay either way. The difference is that high interest rates aren’t forever. That’s why you often hear the expression “Marry the house, not the rate” when it comes to buying a home.
When you find the perfect house at a low price, you should consider taking action even if rates are on the high side. Your equity will grow when the property begins to appreciate in value, which will help to offset any pain from higher interest. If you are locked in at a less-than-desirable rate, you’ll have the chance to renegotiate when your mortgage comes up for renewal.
Looking for some more tips to begin your home search? You may appreciate the related reading below:
- How Can Home Buyers Find A Great Deal In Etobicoke?
- How To Tell If Your Dream Home Is A Money Pit Or A Worthwhile Investment
- Can You Still Buy A House In Etobicoke For Under $1 Million?
The Consequences of Waiting
At the time of this writing, many potential buyers are waiting on the sidelines for the Bank of Canada to announce a rate cut. Though the target rate held steady in April 2024, hopes for a reprieve are still high.
In the meantime, there is a relatively high amount of inventory on the market with low competition. Buyers searching in the “off-market” typically enjoy more options and less pressure to make an offer. This in turn results in greater negotiating power.
When the long-awaited rate cut finally happens, all of that could change very quickly. Many buyers will reenter the market, bringing the return of multiple offer scenarios and higher prices.
You may save on borrowing costs while paying more for the house over the long term. If all of this happens, waiting for a lower interest rate may not be as worthwhile as you think. There are other, more important factors to consider when deciding the right time to buy your new house.
Assess Your Unique Situation
Consider your current life situation and future plans. For first-time buyers, getting into the market as soon as possible can be the difference between owning a house and renting for the foreseeable future. However, keep in mind that buying real estate should be a long-term commitment.
Taking possession now only to sell it a year or two later can be costly and stressful. You could also lose equity if the market fluctuates in the short term. If you plan to stay in the same area for several years, owning a home is an excellent investment that will grow in value over the long term.
Before beginning your home search, ask yourself whether you anticipate any major life changes, such as getting married or starting a family. If you are likely to want to move again in a couple of years, you may want to postpone the decision to buy for now. Your purchase should always align with your lifestyle and future goals.
Are you or someone you love considering downsizing in the next year or two? The resources below can help you along the way:
- How Seniors Can Navigate an Ever-Changing Real Estate Market
- Why Work with an SRES® Agent as a Senior?
- Is It Better To Buy Or Rent After Downsizing?
Signs the Time May Be Right to Buy
When buying a home for the right reasons, interest rates and other outside factors have little influence over your decision. What are some of the signs that now is the right time to make that move? Your answers to the following questions will help:
- Do you have the financial resources to make a purchase right now? Getting a pre-approval can tell you how much you will be able to borrow on your mortgage. Now, assess how much you have to put toward your down payment and closing costs. If you have all that with sufficient funds leftover for the unexpected, you can move forward with confidence.
- How much debt do you currently have? If your income-to-debt ratio is low, you are in a strong position to begin your home search.
- Do you have a stable income that you can count on for the next few years? If you’re in between jobs, you might want to wait until you are more financially established before making the commitment of buying a home.
Your finances will be one of the most significant factors in your decision to buy a new home or wait. However, there are other signs that the time may be right for you and your family to move.
If you’re financially able to buy, the rest is personal. Perhaps you’ve just been offered the opportunity of a lifetime or want to be in the catchment area of some of Toronto’s top schools. Other times, you may be ready for more space or a different style of home. In any case, knowing the market and the resources you have available can allow you to move on your own terms at a time that makes sense to you.
Do you have more questions or are you ready to begin searching for your Etobicoke home? Our experts are happy to help you every step of the way. Reach out to us at contact@thompsonsells.com or call 416-450-5900 to begin a conversation.
Looking for more info?
Get in touch and find out how we can help.
