Buying A Home In Today’s Market: Jump In Or Wait?

Most Canadians strive to own their own home and nearly two-thirds of Canadian households currently own the home they live in.  Unfortunately for many Canadians, home ownership is becoming less affordable as prices remain high across the country.

Whether you’re a first time buyer or are looking to move up in the market, everyone has the same question; should I buy a home now or wait?

Buying A Home In Today’s Market

The national average home resale price in February was $354,754, with the real estate markets in Vancouver and Toronto showing signs of cooling off; coming in at $590,400 and $510,580 respectively.

Prospective home buyers are feeling the pressure to buy now before they’re priced out of the housing market.  The banks are trying to capitalize on this sense of urgency by promoting ultra low 5-year fixed rate mortgages for a limited time.

The challenge many home buyers are faced with today is whether to take advantage of record low interest rates and buy a home now, or wait until prices fall from their record levels before buying a home.

Most doomsday predictions for the Canadian real estate market are referring specifically to Vancouver and Toronto. Housing prices are so high in these two markets that, unless you have a sizable down payment and stable employment, it makes sense to stay on the sidelines and wait for a correction.

But with the average house in Toronto priced around $500,000, home buyers can put down as little as $25,000 (5 per cent of the purchase price) and pay less than $2,000 a month in mortgage payments.

There’s a strong argument to be made for prospective home buyers to jump into the market now before Canada mortgage rates inevitably start to climb.

Outside of these major cities housing prices still seem relatively affordable. Getting into the housing market now, while fixed rates are under 4 per cent, looks like an attractive option.

If you’re a first time home buyer, remember to stress-test your finances using the posted 5-year rate, not the promotional rate you’ll receive from your bank.

Make sure your budget can handle a 2-3 per cent increase in interest rates, which you might be faced with when it comes time to renew.

Put as much down as you can afford, preferably 20%, while still leaving a few thousand dollars to cover closing costs and other unplanned expenses.

You can still feel good about buying a home today by keeping affordability in mind and building a cash flow cushion into your budget.