I hear from time to time from folks that are concerned with where the economy is headed and in particular the Real Estate market and wondering if it would be better to sit back and wait for the economy to sort itself out before making a home purchase decision.
Biggest news around is of course the low oil prices and what it is doing to the Canadian economy. Stocks are taking a hit, Gold is holding steady, cars and trucks are still selling, interest rates are at an all time low, Vancouver and Toronto are setting new records all the time. So what does all this mean when you are thinking of making a move. Folks are wondering if real estate prices are going to go down and should they wait to buy.
It all depends on the "why" factor. For example, if your tired of renting or your family has out grown your current place, you have a good reason to be wanting to move. And there are a lot more why's out there, everyone's situation is different.
Real Estate has always been a long term investment, so lets look at it from that point of view.
If you are well employed, and plan on staying in a home for at least 5 to 7 years, then look at a minimum of a 5 or 7 year term mortgage. With a long term mortgage your low interest rate is protected. And if the real estate values do take a hit and drop a bit, you are protected for at least those 5 to 7 years from the fallout. By tthe time your term is up for renewal the economy should have recovered and your home investment will be growing. That is assuming that property values are going to drop.... and there are many that do not believe that will happen anyway.
What happens if you decide to wait it out and stay in a rental, what's going to happen?? Well, for starters your land lord will appreciate the rent your paying him, and in all probability your rent will continue to rise. So if you waited a couple of years to see what's going to happen to the economy, your going to spend 2 more years in a property that does not suit you families needs any more plus 2 more years of rent payments, heck of a way to spend 2 years.
Plus there is a risk that interest rates will go up, they keep talking about that it happening. CMHC could make it harder for purchasers buying with a low down, they have already changed the % down on purchases over $500,000.
And what happens if there is no down turn in the values of real estate? You have paid rental for a couple of years that you did not need to, you will have lost the equity you could have been building if you would have bought, and you have spent more time in a property that no longer suited your needs.
Investment brokers in the stock market will usually tell you continue to purchase good quality stocks that you can hold for the long haul. It is very difficult to time the market just right to be able to buy low. I think Real Estate can be treated the same fashion, the additional benefit with a home as an investment is that you can sleep in it, stay warm in it, raise your kids and make memories in it.
There are basically 2 things to consider about your home, your financial well being, and your emotional well being. Find the answer to those 2 questions and you'll know what to do.
Cheers for now