Buyers have gone from “fear of missing out” to “fear of overpaying,” or so Blog T.O. would have you believe in this article, but I’ve never met a buyer who wasn’t afraid of overpaying. I conceded that consumer confidence in the real estate market is low.

Here’s the situation: Buyers have always been afraid of overpaying. But, in the olden days (ahem, February 2022), when we were in a scorching market, the Fear of Missing Out often trumped the Fear of Over Paying.

The only way to buy a house in Toronto was to slightly overpay for it and then wait for the market values to rise to meet your house price, which often only took a few weeks. Overpaying is better than missing out on the market (or the house) in a market trending upwards.

Now, we are in a market trending downwards, which is understandably scary for buyers and sellers. In some neighbourhoods in Toronto, the market has gone down as much as twenty percent and is projected to continue to decline into next year.

However, this should not stop you from buying a house. The price decline correlates directly with rising interest rates. So, even with prices dropping, your monthly payments will be higher than those who bought in February. If you are locked into a pre-approved interest rate right now, you should buy soon to take advantage of that rate. We expect that interest rates will continue to rise.

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Also, let’s reframe the story of what buying a house means. Buying a house means buying yourself security, both financially but also emotionally. You are purchasing a home. You should get comfortable with the idea that you may buy a house and then watch the house values go down a bit more.

If you have purchased a home that you like and plan on staying there for longer than five years, you are well insulated against market fluctuations.

As we’ve said before, it is tough to time a market, and if you happen to be clairvoyant and know precisely when the market is at its bottom, the chances that you’ll find your dream house in those conditions are negligible. The best time to buy a home is when you need a new house.

As long as you can pay your monthly bills and can stay there for five years or more, you’ll be just fine. Real estate was never meant to be a short term investment windfall.

There is one caveat, you should worry about the downward trend in values if you have little cash. If you’re buying a house or condo for under 1 million dollars and are paying only the minimum downpayment on that purchase, you may end up in trouble if the market goes down again.

The more cash you have in your home, the better. It is essential to set yourself up so that if the market goes down another five or ten percent, your home is still worth more than what you owe the bank.

➤ Want to chat more about buying? You can reach out right here.