It seems that doom and gloom is everywhere in the economic and real estate world. US banks are falling like flies, US real estate is dropping like a rock – the only thing that is going up is foreclosures! I was recently talking to a friend who is trying to sell a house and he mentioned that some of the feedback he’s been getting from potential buyers is that they are very worried about the economy tanking, real estate prices dropping etc etc. While there is a lot of uncertainty with respect to housing (as there usually is whether we realize it or not) it occurred to me that if you have reasonably sound finances and are looking for a house then perhaps now might not be a bad time to buy. While I can’t predict where house prices will go in the future, I do know that if you are a serious house buyer in Toronto right now – you will have less competition than you did 6 months ago which in theory should translate into a lower price.
Here are some points to consider if you are debating shopping for a house
- How is your financial situation? If you only have a 5% down payment and 4.8% of that was borrowed from your parents then maybe now is not the time to buy. Zero percent down payments are not the end of the world but they aren’t a good sign either.
- Is your industry doing well? If you work for a car company or the Canadian branch of failed US bank then you might want to hold off for a bit. On the other hand if you are a teacher or government worker then your job should be relatively safe.
- Do you own a house now? When the market is doing well, it is almost a given that most people will buy a new house and then sell their old house. Problem is that if the market tanks on you then you are left holding a rather large bag. I’ve always been a fan of selling the current house first and then look for a new house. Worst case scenario is you end up moving into an apartment or with relatives for a while – it’s better than owning two houses that you can’t afford and can’t sell!
- Are real estate prices going to drop? I wish I knew the answer to that but one thing I can tell you is that real estate is very regionalized in Canada so just because prices are dropping in Calgary and Vancouver doesn’t mean that the Toronto market will drop the same way.
- Will US-style real estate problems will start to appear here in Canada? Not a chance – I’m not saying that our real estate won’t go down but the lending standards in Canada were far more stringent than in the US which is why their real estate rose so high and it’s also why it’s crashing so hard.
- Why do you want to move? If you are moving for reasons of convenience rather than necessity then you should consider delaying the move if it looks too risky.
- What is the rush? This applies to any economic scenario – a lot of people take too little time when shopping for a house. Slow down, figure out the market, learn what is out there.
- What if my Canadian bank fails? It won’t – stop reading CNN and get back to the MLS listings!
- Think about the buying vs renting equation. Maybe renting is better for you at the moment.