Do I Stay or Do I Go Now…

Engaging with numerous clients recently, we delved into their real estate plans for 2024, unveiling intriguing insights. A sense of caution looms in the real estate sector this year. Buyers are hesitant due to affordability concerns and a perceived scarcity of options in various price ranges and styles. Although overall supply has increased compared to previous years, the market faces chronic shortages amidst population growth.

Forecasts by CREA project a 5% rise in average home prices nationwide this year, aligning with long-term averages. For instance, in Guelph, the average price stands at $784,058, while in Centre Wellington, it is $642,967, and in the region serviced by Guelph & District Association of Realtors, it amounts to $809,201.

Recent federal budget updates allowing 30-year amortizations for new construction homes impact scenarios like the Northside project by Granite Homes. Consider a unit priced at $630,000 with a 10% down payment and a 30-year amortization at a fixed rate of 5.24%. Payments amount to $3,210 per month. If rates drop by 0.5% to 4.75%, monthly payments reduce to $2,942, representing potential savings.

As shown in the chart above, a mere 1% price increase alongside declining rates poses financial implications.

For instance, a 1% price hike results in a $6,299 increase in the property price. Anticipated price hikes throughout the project's buildout may conservatively range between 5-15%, outpacing potential mortgage rate benefits which means 1% increases are very conservative. Assuming interest rates drop by ½% over the next 4 months, and prices rise by 1% over the same period, the monthly payments are essentially the same, you’ve added just over $5,000 to your mortgage amount and missed out on $6,300 of equity boost.

Insights from a recent conference featuring a senior economist underscore the housing deficit in the Canadian market, suggesting that housing shortages outweigh downward price pressures. To navigate market fluctuations, consider shorter mortgage terms or variable rates for flexibility.

By positioning yourself strategically, you can navigate rate changes and potential price hikes, gaining a competitive edge in the housing market. The rate changes & price hikes will impact everyone, but for those who have positioned themselves well & anticipate these changes, this won’t be a devastating surprise.

Overall, for a first time buyer to enter the market, there needs to be a focus on a 3-5 year window around affordability, building stability, and equity growth. Focussing solely on interest rates or waiting for prices to dramatically decrease is a strategy that is destined to fail, as this market has become more complex and competitive than previous generations have experienced. The market isn’t going to magically fix itself while everyone sits on the sidelines.

Collaboration is key in this process. Realtors, as fiduciaries, prioritize your best interests by providing tailored advice and connections with industry professionals for a comprehensive strategy to enter the housing market successfully.

For a private consultation or more information on the above example please reach out, and we’ll be happy to book a no-obligation consultation.

Thanks for reading.

Enjoy the weekend,

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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