Buyers right now are terrified of buying a house until the market reaches its bottom. They worry that they’ll buy a home today and then watch the prices continue to decline. Buying a house that loses value, especially in a market like Toronto that traditionally goes up, feels like the ultimate humiliation. This is especially true because purchasing a home makes most people feel vulnerable. They’re making decisions about a large amount of money in an uncertain time.
Sellers, likewise, are waiting to list their homes until after the market “bottoms out.” The embarrassment of selling your most significant investment at the lowest point in the market feels like it’s too much to bare for most homeowners.
Looking for more up-to-date market insights? Explore our fall 2022 real estate predictions here.
For both groups, this is an exercise in futility. We only know about the bottom of the market in retrospect. I would pay a lot of money for a reliable crystal ball. But, it doesn’t exist, especially when predicting the current real estate market trends. Anyone who claims to know the future right now is wrong. There is a mistaken belief that the Bank of Canada has a grand plan they’re keeping secret. Unfortunately, they don’t. They’re watching inflation and making decisions about interest rates based on inflation indicators. That means they often don’t know where interest rates are going until the last minute. Of course, we can reasonably expect that interest rates will continue to rise. But we don’t know when, by how much, or for how long. No one does.
For Buyers
Even if you knew that the market was at its bottom, finding your dream home when it bottomed out is highly unlikely. Real estate decisions are both financial and emotional. Buying a house needs to make sense financially, but it also needs to make sense for your family and lifestyle. Buying a home is not the same as investing in the stock market. You must ensure the house works for you and that you like it. If you decide purely financially, you will likely not be happy and sell sooner than you would have if you purchased a home you wanted. The chances of your house coming available when the market is at its lowest is unlikely because sellers often delay selling their home until the market picks up again.
Buyers also have a mistaken belief that lower prices = more affordability. This is only true if you have a lot of cash. The low prices correlate with high-interest rates, therefore, affordability now is worse than it was when prices were higher but interest rates were lower. If you have a pre-approval and are locked into a lower rate, it will be cheaper to buy now rather than wait for the prices to get lower.
For Sellers
The truth is if you can delay listing your home for the next five years, do it. If you can wait that long, you’ll likely make more money. But, if selling your home is a good idea for your life situation, then you shouldn’t worry about trying to time the market. Someone who needs to sell can rarely wait several years. Sellers are still mourning the prices of early 2022 and secretly hoping their house will sell as it would have in February. Unless you sell your house and then live for free somewhere, the only thing that matters is buying and selling in the same market. If you need to sell your home to upsize or downsize, make sure that you’re doing this all in the same market. Therefore, your purchasing power remains the same as it always would have been. The other way to insulate yourself from the market changes is to sell your house first and then buy a home. This way, you’ll know exactly how much money you have to spend, and if the market goes down a bit between when you sell and when you buy, all the better.
Gearing up to sell your home? Check out these blog posts to help you prepare for today’s market.
- Maximize Your Property Value With These Renovations
- Why It’s More Important Than Ever to Work With a Local Real Estate Agent
- The Market Has Changed. Your Selling Strategy Should Too
Finally, let go of the shame of buying or selling at the “wrong” time. Real estate is supposed to be a long-term investment. If you buy a house and then watch prices continue to fall, take a big breath and remember that you have a lower interest rate than the current buyers and that you’ll still make money when you sell your home. For sellers, if you sell your house and then watch the prices slowly go up, remember that no one can accurately predict this market and that you made your life decisions based on your family’s needs.
Robyn VanderVennen
The Kim Kehoe Team
