Over the past few weeks, we've heard some pretty scary terms being tossed about regarding the housing market: Canada is in a housing boom – bubble – bust; the market is softening, deflating, freefalling, crashing. The truth is that the federal government's new mortgage qualifying regulations introduced a lot of uncertainty into the market. Many folks are calling us with one question on their minds, "Should I buy now or wait?"
The Argument to Buy
If you've found the "forever home" of your dreams, short-term changes in the market shouldn't be a major concern for you. You'll own the property for long enough that the market will ebb and flow, and should your home's value drop over time it will likely bounce back up. The practical effect of the stricter qualifying rate has been that fewer potential buyers are able to obtain financing for their purchase. If your funding is secure – especially at a favourable mortgage rate – you will likely face fewer competing offers for the property you want to buy, and there is less chance you will end up in a bidding war.
The Argument to Wait
Most analyst predictions call for the volume of housing sales to drop in 2017, and we are already seeing that trend in some markets over the past month – most noticeably in Vancouver. October also saw fewer housing starts than in previous months as developers put their plans on hold to see where the market is headed. Opinion is divided on whether these factors will lead to lower prices, but with fewer people able to enter the market we believe that the only direction prices can go is down, provided that the inventory levels either remain at present levels or increase.
If you are in a situation to wait for 6 (or ideally 12) months before purchasing a home, you should find a lot more stability in the market by next Fall. You will also be able to take this time to strengthen your financial position in relation to the qualifying rules by growing your savings and improving your credit. (Wondering how? We can help you plan for your goals.)
Location, Location, Location
The intention of the federal government's regulations is to slow or soften overheated markets. In the case of Vancouver, especially when combined with the regional foreign home buyers' tax, the signs already point to a slowdown. However, in Toronto sales and prices continued to rise through October to the point of pushing demand into surrounding markets.
As a contrast, Winnipeg has seen slow, steady increases in both prices and number of sales, which is predicted to continue. The average purchase price has remained moderate due to a balanced supply and demand.
On the whole, the housing market will still have significant regional variations and your location will be key to deciding whether to buy now. If you can afford to wait for the full effect of these changes to be felt and things to stabilize, it's likely you will benefit from waiting.
Of course, there are other factors that will weigh in to your decision to buy or wait, including job stability – especially if you are self-employed – and your overall financial goals. We'll take a look soon at how the business for self mortgage segment has been affected by these regulatory changes.
If you'd like to chat about your specific situation, why not take advantage of a free consultation? Contact Auxilium Mortgage today to speak with one of our planners: call Toll-Free 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours, Monday through Friday 8:30 a.m. – 5:00 p.m. Our team can also arrange an appointment evenings or weekends to work with you.
This article presents the informed opinion of the author. Any major financial decision, such as whether to purchase a home, should always be made after seeking professional guidance you trust for your unique situation.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.