Interest rates have been rising and the real estate market has changed since earlier this year. Who should buy a house in this real estate market?
Let’s look at 3 groups I believe should buy in this marketplace:
Real Estate Investors
Rental market is on fire. Rents are at pre-pandemic levels and will get stronger as more buyers are pushed out of the market due to higher mortgage rates and more people are coming back to the city. Here is an example: 2 bed condo in central Toronto was renting for $3100 in the fourth quarter of 2019. In the 2nd quarter of 2022, 2 bed condos are renting for around $75 less. If you’re looking to invest in real estate this is a good time as you have no competition from other buyers and there is a strong upside on the rental income due to higher mortgage rates pushing some buyers into the rental market.
Move up buyers
If you have outgrown your current home, this environment might be beneficial to you. You might ask how? Assuming you are buying a more expensive home, selling your current home you would get less than what you would have gotten back in January or February this year, however you would save on the larger purchase price since you would be buying a more expensive home with little to no competition. The savings on the larger purchase would offset the lower sale price on your current home. For example: you live in condo that would have sold for $650k earlier this year but might sell for $630k now. The house you are considering to buy was selling around $1.8 mil but now might sell for $1.7mil since there aren’t 15 offers you are competing against. The savings in the larger purchase offset the lower selling price of your current home.
First time home buyers
Not too long ago, pre-emptive offers, multiple offers and homes sold within a day or two was in style. All that has evaporated. If you are a first time home buyer who can qualify based on today’s mortgage rates, you can find the home you want, negotiate with the seller, buy with conditions just like the old days.
Remember one thing, we still have a supply/demand imbalance. Canada is averaging over 400,000 newcomers annually. We are not building enough housing to accommodate the growing population. Once the economy settles, this issue will be back in the headlines. Till then, take advantage of the buying opportunities if your financial situation allows for it.
And until next time…..happy home hunting!!