For all those first time buyers or those who have been waiting for the right time to move into a bigger household, now is your time. With housing prices dropping and interest rates at record lows, now is the time to consider purchasing a home.
House prices across Canada fell nearly 10 per cent and sales slipped 42 per cent in November compared with the same month last year, a drop the Canadian Real Estate Association says it hasn't seen since the last housing recession nearly two decades ago.
CREA said 27,743 homes were sold last month across Canada, a drop of 12.3 per cent compared to October and "the lowest level for monthly activity since January 2001." That follows a 14-per-cent sales drop in October, compared to the previous month.
Housing and commercial real estate prices plunged in the late 1980s after a sharp spike in real estate prices for several years when the economy was booming. The housing decline led to a price drop of up to 20 per cent in many markets and was triggered by rising mortgage rates and the lingering impact of the 1987 stock market crash.
The current situation in real estate has resulted from tighter credit markets and the general national economic condition. The chief economist for CREA said "What we are seeing is a broad trend across Canada of very cautious buyers, and very cautious lenders." What we are experiencing now is that more and more people are now unable to secure mortgages. People who were previously eligible for mortgage loans are now finding it more difficult.
But is this a bad thing? The real estate catastrophe in the Unites States stemmed from lenders providing loans to people who should not have been eligible in the first place. In some cases, people simply had to submit intentions of a future job to secure a loan.
Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, said there's no question lenders are being more thorough in reviewing their borrowing customers in the current economic environment. "However, if you have steady employment, a good income and a healthy credit score you shouldn't have any difficulty in securing a mortgage," Murphy said. So, rather than viewing this as a negative, we should be viewing this situation as lenders finally being responsible and sensible.
Scotiabank economist Adrienne Warren agrees there is more scrutiny from lenders today. She pointed to the cancellation of the 40-year, no money down payment mortgage product in October, which has resulted in some "buyers at the margin being unable to get credit."
Warren said the sales drop is due to many home buyers putting off the purchase in the current recessionary environment, where layoffs are being announced across all industries. It is understandable that buyers are nervous, but if you have steady employment and good credit, now is actually the time to be considering a real estate purchase as interest rates are the lowest they have been in years!
If you have been considering a real estate purchase but are unsure about when is the best time for you to act, please call me at 905-220-9198 or send me an email with your questions and concerns. I would be more than willing to sit down with you to review the current market situation, mortgage rate trends and housing availability and affordability. I can also help you set out a realistic plan to save for your down payment and outline the steps required to pave the road to home ownership.
With housing prices at the levels they are currently coupled with interest rates at record lows, now is really the time to seriously consider purchasing real estate. Please check out one of my other blog posts entitled Buying up in a down market! to illustrate the benefits of purchasing right now!