After the rush of the last few years, it was easy to think that the housing boom would never end. Intense competition and bidding wars have been the norm for a while now. Buyers have become accustomed to having to offer over the list price to secure a house. And the idea of placing a conditional offer was unthinkable at one point.
Now, the market has shifted away from favouring sellers.
It’s still not quite a buyer’s market. However, house hunting now is a very different experience than it was a few months ago. Here’s what you need to know about the changing market.
Prices are Down
Toronto is well-known for its sticker shock when it comes to housing prices. Although it’s not really that surprising when you think about it. The amenities, convenience, excitement, and high quality of life Toronto offers all contribute to the demand for housing.
That said, prices have fallen steadily from April to July. What happened?
The sudden slow down is the result of several factors:
- Rising interest rates have made it more expensive to borrow money
- Inflation has many buyers and sellers hesitant to make a move
- The market was overheated and in need of a correction
For downsizers and upsizers, lower prices in the market may represent the perfect opportunity to sell and then buy. Here are some ideas that may help:
- Is Now the Right Time to Sell Your Condo
- Our Top Tips For Downsizing in Toronto
- All About Townhouses: What Buyers Should Know
The Market is Correcting, Not Crashing
Reading news headlines made many people nervous that the real estate market was about to crash. Those fears were unfounded. It turns out that the conditions in Toronto are holding strong even though prices have fallen slightly. A bounce-back is inevitable. It’s just a matter of when.
In fact, we’ve already seen a slight uptick in housing prices from July to August. According to the Toronto Regional Real Estate Board (TRREB), the average cost for a Toronto home was $1,074,754. In August, it edged up to $1,079,500.
Whether this is the start of a new trend remains to be seen.
Another interest rate in early September may cause a slightly slower Autumn market than usual. However, we are not likely to see another rate increase anytime soon, so the housing market will likely stabilize.
Higher Interest Can Mean Paying More – Even With Lower Prices
Buyers all over the province are rejoicing that prices have finally dropped. Keep in mind, however, that you have to now account for the higher interest rates. On a loan of $1 million or more, even a tiny rate increase can add up.
- It increases your monthly payment
- It reduces the amount you can qualify for when financing
Another affordability factor affecting first-time buyers and some move-up buyers is that it is more difficult to pass the stress test. The banks don’t use the current rate to determine your eligibility for a loan. They base it on a higher rate to protect you – and themselves – in the event that there is another increase. After the last two significant rate hikes, some potential buyers have found it difficult to qualify for the financing they need.
Tips to Help Offset the Effects of Rising Interest
Rising interest rates affect you less if you don’t need to borrow as much in the first place. The more you pay upfront, the less you will pay for your house overall. Of course, this may be much easier said than done, especially for a large purchase like a house. However, here are some ideas that can help you:
Save as much as possible for your down payment. Government programs such as the Home Buyer’s Plan and the First-Time Home Buyer Incentive may help.
- Maximize the sale of your current house. The more you make from your sale, the more you have to buy your new home, and the less you need to borrow.
- Get help from your real estate agent to buy your new property at the lowest possible price.
- Work with a mortgage professional who can help you access the best rates
If you can reduce your loan amount even by a few thousand dollars, it can make a massive difference over time.
Toronto Real Estate is a Smart Investment
Real estate is generally regarded as one of the best investments you can make. This is especially true in Toronto as the demand for housing grows. Even if you by now and the price goes down, they are sure to bounce back up again. Real estate is not just a roof over your head. You own a tangible asset that will create value and increase your equity over the long term.
Even if you’re not planning to move, now may be an excellent time to invest!
- Should You Invest in an Income Property Now?
- How to Determine a Good Investment Property
- Refinancing Your Mortgage? Read this First
A Local Real Estate Agent Can Help You get the Best Results
Whether buying your first home or your seventh, a local real estate agent can guide you through all the available resources to help you break into the market. They can also negotiate to help you get the best value in a neighbourhood you will love.
And what you may not realize is that it costs nothing to have an expert working on your behalf. A buying agent gets paid by the seller once your offer is accepted.
When upsizing or downsizing, your transaction can become more complicated. Your equity in your current home shields you to a certain degree from rising interest rates and price fluctuations. However, your results depend on getting the maximum value when buying and selling.
Your agent will be there to answer the tough questions and guide the process so that you can enjoy a seamless transaction and move to your new home.
Are you ready to take the next step but not sure where to start? A little advice from a local professional can help you reach your goal sooner rather than later. Feel free to reach out to us by email or call 416.443.0300 with any questions you may have.
Meet The Erica Reddy Team
Find out how our specialized skill sets and extensive Toronto market expertise empower your real estate venture.
