With all the pessimistic news lately many people are holding off making a decision to buy real estate. They are concerned that the market will be coming down and if they buy now that they could end up losing money. Most of these statements are made without really thinking through the process and evaluating all the facts.
Many experts believe that in Ontario we have moved to a buyers market where there are more sellers than buyers. As this occurs prices tend to be lower as the buyers have a better selection and sellers are more willing to negotiate the price. In certain parts of Ontario we have seen a noticeable decrease in the average selling price.
Some people confuse this statistic with thinking that prices have come down, when in reallity it may mean that the higher price homes are not selling but the lower priced ones are thereby bringing down the average sale price. Saying that we have noticed a slight drop in home prices for properties valued lower than 300k of about 5% in the Kitchener Waterloo market.
So why not buy now? The time to buy real estate is when more people are selling, if you hold off to buy when the market turns around then there will be more competition and prices tend to be higher. Furthermore, most people that buy homes require mortgage financing. With the average 5 year interest offered by brokers coming down from 5.80% to 4.49% the cost of carrying a mortgage has come down considerably.
This means that by buying now vs. buying in the fall of 2008 the average 300k home has come down by $15K but the interest savings on a 95% financing would have come down approximately 18k compared to last autumn. This translates to a total savings of about 33k when you add up the interest savings over 5 yrs and the reduced price compared to last fall.
So what does this all mean- well the time to buy is now not later as if you wait until the market improves to buy, chances are that many more buyers will also enter into he market. When this occurs and with the rebounding economy the inflation rate tends to go higher. The Bank of Canada then start to raise interest rates thereby making it more expensive to carry a mortgage.
So unless you are in danger of losing your job, now is the time to jump into the market and buy! For those of you that are renting right now and paying $1,300 per month in rent. You can buy a home valued at $250K and have the same payments as you are paying for rent.