Great Questions From Our Clients!
Great Questions
Over the past few months, I have spoken with several clients who expressed concern over where the market was heading and what that means for their real estate plans. Many experts remain positive that we will start to see a recovery as we move into 2024 while others are less optimistic. Since these were such great questions, I wanted to share my answers just in case you had these same questions.
How Do Higher Rates And Limited Supply Affect My Affordability?
Home prices have decreased in several markets (a 10% decrease in Hamilton from last year), however, the interest rates are still high and the limited supply is keeping housing prices at levels that continue to challenge a buyer’s affordability in other markets across the province. If you are wanting to move, give me a call and we can look at the supply situations in the areas you are interested in. It is key to understand what is happening in your local market before making any real estate decisions
Will We Start To See Rates Come Down Soon?
Experts have predicted that we may see another interest rate increase in July to cool the market even further. However, they also believe we will see a reduction in rates moving into 2024. If the rates come down while supply is still limited, we will start to see prices begin to rise again moving into 2024. While it is important to watch your interest rate as it will affect your affordability, it is also important to understand what a rate decrease in a market with limited supply will do to housing prices. If you are thinking of making a move in the near future, you may want to plan for that move before prices start going up again.
Should I Rent Until Mortgage Rates Come Down?
One of the effects we are seeing from a less affordable housing market is a higher demand in the rental market. With more and more buyers being pushed into the rental market, we are seeing a dramatic increase in rental rates in the province. For the first time, we are seeing more bidding wars for available rental units than we are in the purchase market. If you choose to rent for a year until rates come down, you will be paying a lot more in rent which will eat into your downpayment money. With housing prices decreasing, talk with your lender about a shorter-term mortgage so you can take advantage of the lower housing prices and then renew for a longer term once the rates come down.
Is NOW a Good Opportunity For Investors?
If you are looking to spend investment dollars, and the higher interest rates do not scare you off, now is a great time to invest in real estate. With prices coming down and rental rates at an all-time high, it is a great opportunity for investors to expand their real estate holdings portfolio. Many investors look at the long term when making investment decisions and they understand that rates will eventually come down. Now is a great time to add another property to your portfolio while prices are down.
Will We Start To See Foreclosure Sales?
Several clients have asked me if we will start to see people losing their homes to foreclosure similar to what happened in the U.S. in 2007/2008 and 2016/2017. A component of our housing downturn in 2016 came when the government introduced the stress test. It was meant to protect mortgage holders if there was a sharp increase in interest rates. The current stress test rules require borrowers to prove they can handle either a minimum mortgage rate of 5.25% OR their qualifying rate plus 2 percentage points (whichever is higher). Currently, lenders are offering 5-year fixed rates between 5.5% and 6.25%. To qualify for a mortgage, buyers will need to show they can afford payments between 7.5% and 8.25%. While I don’t see buyers going into foreclosure, I do see people taking out shorter-term mortgages when it comes time for renewal and waiting for rates to come down before locking into longer-term mortgages.
Should I Wait To Sell When Prices Go Back Up?
One thing to keep in mind as everyone tries to time the real estate market correctly is that everything is relative when it comes to the market. This is important to keep in mind if you will be selling your current home to buy your next home. I often hear people say that they want to wait until the market improves before they sell so they can get more money when their home sells OR they are wanting to wait until housing prices decrease before buying their next home. One thing is certain when it comes to the real estate market. If you wait for a decrease in market prices to buy your next home, you won’t get as much money on the sale of your current home. Conversely, if you are waiting for market improvement so you get maximum return on the sale of your current home, you will be paying more for your next purchase.
Send Me Your Questions!
I am always happy to chat with clients about their questions or concerns with the real estate market. Please don't hesitate to reach out at any time as I am always happy to help.