Is now an excellent time to purchase actual property? Recommendation on when to get into the market
Take advantage of the market now to get started on your real estate journey, with help from Guelph REALTOR® Dave Neill
There’s a misconception that the real estate bubble has popped, and prices will continue to collapse—then take a decade or more to recover.
While we have seen a decrease in prices, there is definitely a ‘price floor’ that has developed; it is not likely to see significant decreases beyond current market levels, without another substantial change in interest rates.
There are three factors that will continue to underpin real estate prices.
First, the replacement value of real estate.
While prices have come down, construction costs have not. Gone are the days when a builder can put up a townhouse for less than $200,000. So you can expect new construction homes and condos to hit the market at prices that will continue to increase.
Second, the cost of rent is also a good indicator of how close market prices are to sustainable values.
With many buyers either holding off on making a purchase or failing to qualify for financing due to increased interest rates, we have seen a flood of people in need of rental housing, which has pushed rent prices up. There are still opportunities that exist in the market where an investor can purchase a home and rent it for enough to cover a home’s monthly carrying costs.
As long as these opportunities exist, there will be support for current market values.
Third—and this is the largest factor that will impact real estate price stability over time—there is massive demand for housing, and given current immigration levels, this will continue to exist.
Unlike the real estate crash in the 80’s, when cities were still expanding, and builders were selling new homes by the thousands, we still don’t have enough supply, and that math isn’t likely to change any time soon. While we will continue to see new housing added through intensification and infill, it’s not enough to meet the growing demand.
This factor will continue to underpin real estate values, especially for detached homes on large lots, which will become a smaller percentage of the real estate market as we work to accommodate more people within our existing footprint.
Many are surprised to learn that there are lots of options available based on your own individual circumstances and financial situation, and that getting started on the real estate ladder is also possible at times like these, when the market has seen a meaningful decrease in prices.
“Anyone who is looking at the current statistics on housing prices knows that compared to the peak in late winter 2022, we have seen prices come down by a meaningful amount,” says REALTOR® Dave Neill. “So what happens to those who bought six months ago—and why would someone consider buying now, instead of waiting for prices to keep falling?”
First, it’s important to note that anyone who bought at the peak earlier this year really only loses money if they sell, and most people who buy real estate don’t sell it within the first few years.
Could they have waited and paid less? Possibly, but with interest rates rising at a record pace—including those that are used to qualify for a purchase—those buyers may no longer qualify to buy the home they want, even if that home is listed at a lower price. And if they sold a home to buy one, the odds are they would end up in the same spot, since the price of the home they sold would have come down by a similar amount.
While home prices have certainly fallen, ownership costs have not, in fact in some cases they may have increased along with the higher interest rates.
“Each situation is unique, but the savings in monthly costs with a $150,000 decrease in a mortgage amount can be offset by a 2% increase in interest rates. In this case, we’ve seen rates spike about 3% in 8 months, which means from a monthly cost perspective, housing affordability hasn’t changed much,” says the REALTOR®.
“For anyone considering purchasing real estate, if they decide to hold off in order to wait for ‘the bottom’, they are at risk of missing out on some good opportunities in what some may consider a ‘buyers’ market’. They’re also overlooking the long-term view that is helpful when evaluating a real estate purchase,” says Neill. “You’re looking at the value of your assets in 10, 15 or 25 years, not next month.”
If you’re looking to buy real estate, LIVEHERE Real Estate can support that journey from start to finish. They’ll set up a budget and evaluate your financing options, and help you make the decision that is in your best interests. Once you’ve firmed up on a purchase, they’ll be there for the lifetime of your ownership to help you navigate any issues that might arise.
For more information on owning real estate in Guelph, Brantford, Elora, Fergus and Puslinch, including student rentals in and around the University of Guelph, visit www.thelivehere.com, Coldwell Banker Neumann Real Estate Brokerage or call 519-760-9619.
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