General

Last year, one factor drove the real estate market more than any other: rising mortgage rates.

In March 2022, the Bank of Canada began a series of interest rate hikes in an effort to pump the brakes on inflation.¹ And while some market sectors have been slow to respond, the housing market has reacted accordingly

Both demand and home prices have softened, as the primary challenge for buyers has shifted from availability to affordability. And although this higher-mortgage rate environment has been a painful adjustment for many Canadians, it should ultimately lead to a more stable and sustainable real estate market.

So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While no one can forecast the future with certainty, here’s what several industry experts predict will happen to the Canadian housing market in the coming year.

MORTGAGE RATES WILL EVENTUALLY STOP CLIMBING

Over the course of 2022, we saw the benchmark rate rise at a record pace—a whopping 400 basis points in just nine months. Fortunately, there are signs that the central bank’s series of rate hikes may be coming to an end.²

After last month’s half-point rate increase, Bank of Canada officials struck a noncommittal tone about future rate hikes, prompting economists to speculate that the central bank may pause hiking rates by early spring, if not sooner.³

According to Stephen Brown, a senior economist at Capital Economics, the central bank is likely to hike rates at least one more time before it shifts gears. “We would not rule out a final 25 basis point interest rate hike in January,” said Brown in a client note. “But the Bank is very close to the end of its tightening cycle.”³

What impact will this have on mortgage rates? Variable mortgage rates could finally stabilize. However, buyers hoping for a big drop later in the year may be disappointed. Although some market analysts are betting on lower rates, CIBC economist Benjamin Tal thinks that’s unlikely as long as inflation remains a factor. “I think that the Bank of Canada is determined to make sure that they will not touch interest rates in terms of cutting them before inflation is totally dead,” said Tal in an interview with Canadian Mortgage Professional.⁴

Fixed mortgage rates, on the other hand, could continue to trend lower as bond yields crumble.⁵ James Laird, co-CEO of Ratehub.ca, predicts that Bank of Canada’s benchmark rate will hold steady through 2023, but fixed mortgage rates may tick down because of bonds. “Bond yields will decrease throughout the year, allowing fixed rates to follow suit,” said Laird in an interview with Canadian Mortgage Professional.⁶ However, those rate decreases may be fairly muted as long as banks’ borrowing costs stay higher overall.

It’s also possible that rates on both variable and fixed-rate mortgages will climb instead. Bank of Canada Governor Tiff Macklem has made clear that the central bank is prepared to keep hiking rates aggressively if inflation fails to dissipate. “If high inflation sticks, much higher interest rates will be required to restore price stability,” said Macklem in a recent speech to business leaders.⁷

What does it mean for you?  While no one can predict the future of mortgage rates with certainty, an end to interest rate hikes could bring some much-needed relief for borrowers. If you have plans to buy a home or renew your mortgage in the coming year, you’ll want to weigh your options carefully when deciding between a variable or fixed rate. Reach out for a referral to a mortgage professional who can help.

BUYERS WILL RETURN TO THE MARKET

The pace of home sales fell steeply last year as higher mortgage rates priced would-be buyers out of the market. However, some industry experts predict that the Canadian housing market is poised to turn a corner.

Although many buyers and sellers are currently in a stalemate over housing prices, market dynamics may shift this spring as more homes go up for sale.

“Zooming in on demand and supply conditions, the drop in unit sales has been the steepest on record, but the pace of the decline is starting to slow,” write CIBC economists, Benjamin Tal and Katherine Judge, in a recent forecast.⁸ Douglas Porter, chief economist at BMO Capital Markets, projects that existing home sales will fall through the first half of 2023 and then reverse course and begin to rise in Q3.⁹

Victor Tran, mortgage expert at Ratesdotca, also speculates that a stabilization in mortgage rates will bring home buyers back out. He told the Financial Post in a December interview: “We may be seeing the bottom of the housing market trough before buyers begin to enter the market in spring of 2023.”¹⁰

Buyers’ purchasing power will still be constrained by higher mortgage rates, though, as well as by a stringent mortgage stress test for uninsured mortgages and a hefty monthly payment for insured ones. So a buyer’s ability to participate in the market will depend, in part, on a seller’s willingness to negotiate.

What does it mean for you?  If you’re a buyer who has been waiting for conditions to normalize, now may be an ideal time to start your home search. As more buyers begin to enter the market, you’ll face steeper competition and reduced negotiating power.

And if you’ve delayed selling your home, this could be the year to make a move. Reach out to schedule a free consultation and home value assessment.

HOME PRICES WILL STABILIZE LATER THIS YEAR

Canadian home prices have fallen roughly 10% from their peak, and analysts expect they could fall further before moderating in the second half of this year.¹¹

A Reuters poll of industry experts found a wide range of predictions. But on average, the analysts surveyed project that home prices could fall another 7.5% or so. However, the majority report that the risk of a market crash is low.¹¹

A nationwide housing shortage is expected to prop up prices even as sales volume falls. According to Robert Kavcic, senior economist at BMO Capital Markets, “We have a unique situation where demand has cracked and buyers can’t qualify for, or afford, early-year prices. But, outside some areas, there’s not a bounty of listings to choose from, and sellers are still able to say ‘no thanks.’”¹¹

Economists at CIBC speculate that home prices will hit a floor in the coming months: “A lower 5-year rate and pent-up demand amplified by demographics will work to establish a bottom in prices by the spring of 2023,” write Benjamin Tal and Katherine Judge.⁸

RBC Assistant Chief Economist Robert Hogue offers a similar projection: “We expect prices will keep falling until a bottom [this] spring. Our forecast calls for the national benchmark price to drop 14% from (quarterly) peak to trough.”¹²

What does it mean for you?  It can feel scary to buy a home when there’s uncertainty in the market. However, real estate is a long-term investment that has been shown to appreciate over time. And keep in mind that the best bargains are often found in a slower market, like the one we’re experiencing right now. Contact us to discuss your goals and budget. We can help you make an informed decision about the right time to buy.

And if you’re planning to sell this year, you’ll want to chart your path carefully to maximize your profits. Contact us for recommendations and to find out your home’s market value.

RENT PRICES WILL CONTINUE TO CLIMB

While home prices have fallen, rent prices have surged—rising around 12% year-over-year, according to data from Rentals.ca.¹³

The average monthly cost to rent a home in Canada is now higher than ever and some analysts are growing increasingly concerned that renters won’t be able to keep up with the higher payments. “We’re getting close to a point where rents are just simply becoming unaffordable for renters,” said Urbanation president, Shaun Hildebrand, to CBC News.¹⁴

But that’s not stopping landlords from collecting higher rents. In 2023, affordability challenges for would-be buyers, inflationary pressures, and an overall lack of housing are expected to continue driving up rent prices in much of the country.

“Interest rates are actually working to elevate rent inflation because many people are not buying, so they are renting more,” CIBC Economist Benjamin Tal told CBC News.¹³

And according to Tal, the higher rates have also disincentivized builders and developers from investing in rental properties. That, in turn, has exacerbated the undersupply of available units.¹³

It’s possible rent prices could ease if Canada’s economy deteriorates, says Urbanation’s Hildebrand. “But over the medium and longer term with aggressive immigration targets and rental construction that’s been stalling recently due to high costs, it’s pretty clear that rents are going to continue to rise higher.”¹⁴

What does it mean for you?  Rent prices are expected to keep climbing. But you can lock in a set mortgage payment and build long-term wealth by putting that money toward a home purchase instead. Reach out for a free consultation to discuss your options.

WE’RE HERE TO GUIDE YOU

While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighbourhood.

If you’re considering buying or selling a home in 2023, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources:

1. CP24 News –
   https://www.cp24.com/news/the-bank-of-canada-has-raised-rates-again-here-s-a-timeline-of-how-we-got-here-1.6125268#
2. Reuters –
   https://www.reuters.com/markets/bank-canada-set-hike-rates-may-signal-it-is-near-end-tightening-cycle-2022-12-07/
3. CBC –
   https://www.cbc.ca/news/business/bank-of-canada-1.6677004
4. Canadian Mortgage Professional – https://www.mpamag.com/ca/mortgage-industry/market-updates/bank-of-canada-could-be-done-on-hikes-for-now-cibcs-tal/430005
5. Reuters – https://www.reuters.com/business/finance/bank-canadas-inflation-fight-made-harder-bond-yields-fall-2022-12-15/
6. Canadian Mortgage Professional – https://www.mpamag.com/ca/news/general/whats-the-bank-of-canada-rate-likely-to-be-in-2023/430755
7. Global News –
   https://globalnews.ca/news/9341825/bank-of-canada-tiff-macklem-speech-dec-12/
8. CIBC Capital Markets –
   https://economics.cibccm.com/cds?id=6f402711-69b3-46a5-afc8-91ede34fe1fd&flag=E
9. BMO Capital Markets –
   https://economics.bmo.com/media/filer_public/04/01/040155ce-0cb2-49ac-b63e-def8e66d4c05/outlookcanada.pdf
10. Financial Post –
    https://financialpost.com/real-estate/mortgage-rates-soar-higher-interest-rate-increase
11. Financial Post –
    https://financialpost.com/real-estate/canada-house-prices-to-tumble
12. RBC Special Housing Reports –
    https://thoughtleadership.rbc.com/quiet-fall-housing-market-across-canada/
13. CBC News –
    https://www.cbc.ca/news/business/rent-inflation-november-1.6650777
14. CBC News –
    https://www.cbc.ca/news/canada/toronto/rental-costs-canada-1.6685602

You don’t have to break the bank to celebrate the holidays in style—even in this season of inflation. Prices may be higher on everything from food to gifts to decorations, but there are still plenty of opportunities to eke out extra savings. 

For example, you can trim your energy bills by up to 20% just by sealing air leaks in your home.¹ Other small fixes—such as swapping old light bulbs for LEDs and plugging electronics into a powerstrip—can boost your yearly savings enough to pay off some of your holiday budget.

And thanks to a pandemic-era boom in online shopping, it is easier than ever to find deals on new and pre-owned furniture, thrifted gifts, DIY decor, and more. Even secondhand stalwarts like Goodwill have joined the digital fray, making it a cinch to score gently-used treasures at extra-low prices.² 

You won’t be the only one bargain-hunting your way to a more financially-stable New Year. Multiple surveys have found that inflation is not only chilling people’s spending, it’s also prompting shoppers to search for better deals and creative ways to reduce their bills.³ 

Here are some strategies you can use to boost your holiday budget by trimming household expenses: 

1. Hunt for Deals on Groceries

If you’re finding it harder than it used to be to serve your family dinner on a budget, you’re not alone. With grocery prices rising at a record pace, many families are struggling to control costs on food staples, such as meat, dairy, produce, and grains.⁴ 

That’s made pulling off holiday gatherings especially stressful lately. But don’t despair: Even with inflation, retailers are still giving motivated shoppers plenty of opportunities to whittle down their bills. 

The key is to pay attention to the cost of each item on your shopping list—not just the most expensive—and look for easy swaps and discounts. For example, try buying non-perishable items in bulk, especially when they’re on sale, and only in-season produce. Or trade name-brand goods for less expensive options from a store’s private label. As you tap into your inner bargain hunter, you could be surprised by what you save when you’re more mindful of your selections. 

And unlike in the old days, you no longer have to clip your way through paper flyers to snag a bargain. Instead, you can save both time and money by scouting for deals online, digitally clipping coupons, and earning cash back through special apps and browsers. For example, coupon aggregation sites, like Flipp, and shopping apps—such as Checkout 51 and Rakuten—make it easy to score discounts and cash back on a variety of purchases, including groceries.

Also, check to see if your neighbourhood grocer posts their weekly flyers online or if Save.ca has published flyers from other nearby stores. If you’re hosting a holiday party, the markdowns you find can help you narrow your food and recipe choices, based on what’s currently on sale.

2. Prep Your Home for Holiday Guests With Pre-Owned Finds

You don’t have to sacrifice style for the sake of preserving your holiday budget either. If you’re expecting company this year and would like to add some festive flair to your home, you can do so inexpensively—especially if you’re willing to decorate with items that are secondhand. 

Thrifting is back in vogue, with an increasing number of shoppers preferring pre-owned furniture and home goods. The number of Canadians who shop secondhand has grown.⁵ In fact, one study found that nearly three-quarters of Canadians now buy pre-owned goods of some type. ⁶ Plus, buying used isn’t just a great way to save money, it also helps the environment by keeping reusable items out of landfills.

Fortunately, it’s become easier to score secondhand deals online. For example, you can scout consumer marketplaces on Facebook and Kijiji. Or you can take advantage of neighbourhood freecycles and “Buy Nothing” groups. And a number of thrift shops now have e-commerce sites, including major chains, like Goodwill. 

If you’re handy with a paintbrush or have some basic carpentry skills, you can also modernize some of your existing furniture by upcycling it yourself. Or, if you enjoy crafting, search through your own recycling or sewing bin for raw material to make one-of-a-kind decorations.

Don’t stress yourself out, though, if you don’t have the time or money to dress your home the way you hoped. Your house can still feel festive and inviting, even if it’s not completely done up.

3. Forgo Major Renovations in Favor of DIY Home Improvements 

Holidays are always a tricky time to undergo big renovations. But with ongoing worker and material shortages, now is an especially bad time to commit. Inflated costs can add thousands to your reno budget—and unnecessary stress to your holiday. 

Instead of suffering through an ill-timed remodel, you’re better off saving this time of year for simpler, less expensive projects you can do yourself. 

One winter-perfect upgrade to consider: Build a DIY fire pit so that you and your guests can roast marshmallows and relax in the cozy comfort of your backyard. You can also add some extra ambiance by hanging energy-efficient LED outdoor string lights that change from white to colourful. These are festive enough for the holidays, but also versatile enough to use year-round.

Or, if you’d rather curl up by an indoor fire, channel your DIY energy into a fireplace upgrade. Adding a wooden beam to the top of your mantel can add an extra layer of coziness. Alternatively, re-tiling or painting your fireplace surround can lend contemporary flair. 

Just be sure to stick to DIY projects that you know you can do a quality job on—especially if your changes will be difficult to reverse. Feel free to reach out for a free assessment to find out how your planned renovations could impact your home’s resale value.

4. Invest in Home Maintenance Projects That Cut Your Utility Bills 

You can save money by completing basic home maintenance tasks, such as swapping your furnace filter and updating your lightbulbs. But if you really want to lower your bills this winter, consider projects that make your home more energy efficient. 

Research by the trade group NAIMA found that most homes in Canada are under-insulated, which wastes energy and money.⁷ The group estimates that Canadians can potentially save hundreds of dollars per year just by retrofitting their homes. Luckily, there are plenty of DIY insulation projects that you can complete in just a few days. For example, some projects you can do relatively quickly include:

• Insulating your attic or basement crawl space
• Weatherstripping doors and windows
• Sealing areas around the house that may be leaking air, including electrical outlets and fireplaces

The savings you get from these projects can really add up. Natural Resources Canada estimates that walls alone account for roughly 20% of heat loss in homes, so they’re a rich target for tackling costly sources of air leakage.⁸ And thanks to the Canada Greener Homes Initiative, you can also save a bundle this year by investing in certain energy-efficient upgrades and claiming a tax rebate.⁹ Be sure to check with us about any municipal or provincial rebates and incentives that may be available, too, before getting started on a project. 

5. Use Expense Tracking to Boost Your Holiday Budget 

To avoid overextending yourself during the holidays, one of the best things you can do is track your income and expenses. If your monthly budget is usually tight, you may need to make some adjustments to free up cash for holiday expenditures.

For example, here’s a sample budget worksheet that we created. Start by adding in your expenses: Under the “Typical” column, you can list your standard expenses, and under the “Adjusted” column, list any areas where you could cut back on spending. 

Then consider how your standard wages may be adjusted this month by extra shifts, additional tips, or an end-of-year bonus. By decreasing your spending and/or increasing your income, you can build room in your budget for holiday gifts and gatherings.

Feel free to utilize this worksheet as a template that you can customize to your needs, or ask us for a PDF copy that you can print out and use right away. 

WE’RE HERE TO HELP

We would love to help you meet your financial goals now and in the year ahead. Whether you want to find lower-cost alternatives for home renovations, maintenance, or services, we are happy to provide our insights and referrals. 

And if you’re saving up to buy a new home, we can help with that, too. This is the perfect time to score a great deal because only the most motivated homebuyers and sellers are active in the market right now. So reach out to schedule a free consultation. We can fill you in on some of the exciting programs and incentives we’re seeing that help make homeownership more affordable.

The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources: 

1. CTV News –
   https://www.ctvnews.ca/lifestyle/8-tips-for-saving-on-your-home-heating-this-winter-1.6116384
2. CBC News –
   https://www.cbc.ca/news/world/goodwill-online-store-1.6605808 
3. MoneyWise –
   https://moneywise.ca/news/economy/canadians-plan-to-spend-less-as-retailers-brace-for-shopping-season
4. Statistics Canada –
   https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2022014-eng.htm
5. Statista –
   https://www.statista.com/statistics/998634/consumers-who-have-shopped-at-thrift-stores-canada/-​​ 
6. Retail Insider –
   https://retail-insider.com/retail-insider/2022/08/resale-going-mainstream-in-canada-with-consumers-particularly-valuing-brand-owned-resale-report/ 
7. NAIMA Canada –
   https://www.globenewswire.com/en/news-release/2016/10/27/1263857/0/en/New-Study-Reveals-Most-Homes-in-Canada-Are-Significantly-Under-Insulated.html
8. Natural Resources Canada –
   https://www.nrcan.gc.ca/energy-efficiency/homes/make-your-home-more-energy-efficient/keeping-the-heat/chapter-7-insulating-walls/15641
9. Government of Canada –
   https://www.nrcan.gc.ca/energy-efficiency/homes/canada-greener-homes-grant/start-your-energy-efficient-retrofits/plan-document-and-complete-your-home-retrofits/eligible-grants-for-my-home-retrofit/23504

Over the past few years, a real estate buying frenzy bid up home prices to eye-popping amounts. However, as mortgage rates have risen, buyer demand has cooled.¹ Consequently, home sellers who enter the market today may need to reset their expectations.

The reality is, it’s no longer enough to stick a “for sale” sign in the yard and wait for buyers to bang down the door. If you want to net the most money possible for your property in today’s market, you’ll need an effective game plan and a skilled team of professionals to implement it. 

Fortunately, we’ve developed a listing strategy that combines our proven approach to preparation, pricing, and promotion—all designed to help you get top dollar for your home. But you will play an important role in the selling process, as well. 

Here are some crucial steps you can take to set yourself up for success as a home seller in this market:

1. Make Strategic Repairs and Improvements

When you sell something, it’s important to consider what your customer wants to buy. And according to a recent survey, 83% of Canadians view “affording necessary renovations” as a major hurdle to buying a home.² If you can present buyers with a move-in-ready option, they will feel more confident in making an offer.

Before your home goes on the market, we’ll conduct a thorough walk-through to identify any problems that could prevent it from selling. In some cases, we may recommend a professional pre-listing inspection. Finding and addressing issues like leaks, rot, and foundation problems up front can pay off in the final sale price. Plus, it prevents sales from falling through because of a red flag on the home inspection, a scenario no seller wants to face.

Beyond repairs, we’ll also help you identify the simple upgrades that offer the highest return on your investment. For example, new paint can give your home a fresh look at a reasonable cost. And according to a recent report, it’s one of the top renovations for return at resale.³ Similarly, minor landscaping improvements can pay off in a major way. A healthy lawn offers an estimated 256% ROI.⁴ 

2. Declutter and Depersonalize

When buyers look at a home for sale, they’re trying to envision themselves living there. That’s hard to do if it’s chock-full of the current owner’s family photos, children’s artwork, and souvenir collections. Plus, cluttered homes look smaller, and older items can make them feel dated. 

Decluttering before you put your home up for sale will help you in the long run—after all, you’ll need to move all your things to your new home eventually. Now is the time to shred, digitize, or organize old documents, donate old clothes, or move bulky furniture into storage. At a minimum, you’ll want to pack away excess items neatly before potential buyers view the home. Remove personal photos and other trinkets to create a blank slate that viewers can imagine decorating with their own prized possessions.

If you feel overwhelmed by this process, we’d be happy to make recommendations or refer you to a local service provider who can help.

3. Stage Your Home for Success

Just as you take care to dress professionally for a job interview, you should always ensure your home looks its best for potential buyers. Home shoppers today are used to scrolling through Instagram and Pinterest, and they want to see the same wow factor when touring a home.

The process of making your home look its best and appeal to potential buyers is called staging, and it can be a game changer. According to the International Association of Home Staging Professionals, an average priced staged home sells 5 to 11 times faster than its unstaged counterpart. Even better, the majority of staged homes sell for 4% to 20% over list price!⁵

Some sellers hire a professional stager, who may bring in furniture and decor to increase the home’s appeal. Others choose to stage their homes themselves. We can help advise you on which route to choose and how much to invest in the process. 

It’s also important to consider what buyers in your neighbourhood are likely to be looking for in a home. We can help guide your staging choices with our local market insights. For example, in neighbourhoods where a large share of residents work from home, it may be effective to stage one room as an office space so potential buyers can envision their day-to-day routine.

4. Prep for Each Showing

Most of us don’t live picture-perfect lives, and our homes reflect that (sometimes messy) reality. But when your home is on the market, it’s important to ensure that it is always ready for viewers, even on short notice. A missed showing is a missed opportunity to sell your home!

Before your home hits the market, it may be worth hiring professional cleaners to get in all the nooks and crannies. After, try your best to keep things spic and span. Just a few minutes a day wiping down counters, sweeping the floors, and vacuuming can make a big difference. 

It’s also worth noting that most buyers will open cabinets, drawers, and closets—so try to make sure everything is as neat and organized as possible. Keep toiletries and small appliances off countertops, and secure valuables and sensitive documents in a safe or off-site.

Want help finding a cleaning service to make your home shine for buyers? Reach out for a referral!

5. Price Your Home Correctly From the Start

In the past few years, you may have seen homes in your neighbourhood sell for shocking amounts and wondered if you could get a similar price for your property. The temptation to list your home on the high side can be strong, but it’s best to be realistic from the start. Even in a strong market, some homes will sit for months. And the longer a property is listed, the more buyers worry that something is wrong with it.

Of course, you also don’t want to set your price too low and lose out on potential profit. That’s why it’s essential to work with real estate agents (like us!) who know the ins and outs of our local market and what buyers are willing to pay today. In a quickly-evolving market, comparable sales from a few months ago can lag the current market reality. 

Fortunately, if you’ve owned your home for several years, chances are good that it’s worth much more today than you paid for it. That means you stand to walk away with a handsome profit.

6. Avoid Acting on Emotion

The past few years of over-asking-price offers with few conditions have set certain expectations for many sellers. It’s only natural to feel hurt or even offended if an offer comes in lower than what you think your home is worth. 

However, it’s important to keep in mind that those market conditions were unprecedented, and we are now returning to a more typical market. Home sellers who act rationally, rather than emotionally, are going to get the best results. 

Remember: You can always counter a low offer. The same goes for repair requests and conditions—everything is negotiable. However, it’s important to accept that the market is adjusting and flexibility is key. Keep your expectations reasonable, and remain open-minded. And you can rest assured knowing that we’ll be by your side every step of the way to help you navigate the process and negotiate a great deal.

7. Work With a Local Market Expert

The economics impacting mortgage rates may be national, but real estate markets are hyperlocal. That’s why working with a professional agent who understands your neighbourhood’s dynamics is essential. Through our experience, we’ve gathered insights that can help us position your home for success in this market. Plus, we have the resources to connect with qualified buyers searching for a home like yours. 

Working with a knowledgeable agent is also the secret to getting as much money as possible for your home. We have access to extensive data on recent sales in your neighbourhood, which we will use to price and promote your property. That’s one reason why homes sold by agents draw much higher prices than those sold by their owners alone. The U.S.-based National Association of Realtors found that for-sale-by-owner homes went for a median price of $260,000 in 2020, while the median for homes sold by agents was $318,000.⁶ That’s a difference of $58,000—and money you don’t want to leave on the table.

YOUR AGENT AND ADVOCATE

Selling a home in a fast-changing market can be stressful. You’re likely to hear conflicting advice and opinions from people in your life, and decisions like what colour to paint your front door or how much to list your home for can be overwhelming. 

That’s where we come in. The market may be adjusting, but we’re here to help you make the most of it. We’re listing experts in our area, and we know what steps you need to take for a smooth, profitable transaction.

If you’re considering buying or selling a home, we invite you to reach out to schedule a free consultation. We’re happy to talk through your specific situation and goals and help you identify your next steps.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources: 

1. Global News –
   https://globalnews.ca/news/8833692/canada-housing-prices-bidding-offers/
2. Chartered Professional Accountants Canada –
   https://www.cpacanada.ca/en/news/canada/housing-survey
3. RE/MAX Blog –
   https://blog.remax.ca/renovations-that-pay-off-on-resale-according-to-re-max-brokers/
4. Angi –
   https://www.angi.com/articles/smart-landscaping-tips-can-increase-home-value.htm
5. International Association of Home Staging Professionals –
   https://pages.iahsp.com/home-staging-statistics/
6. National Association of Realtors –
   https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers#purchased

Deciding whether to jump into the housing market or rent instead is rarely an easy decision – especially if you’re a first-time homebuyer. But in today’s whirlwind market, you may find it particularly challenging to pinpoint the best time to start exploring homeownership.

A real estate boom during the pandemic pushed home prices to an all-time high.¹ Add higher mortgage rates to the mix, and some would-be buyers are wondering if they should wait to see if prices or rates come down.

But is renting a better alternative? Rents have also soared along with inflation – and are likely to continue climbing due to a persistent housing shortage.² And while homebuyers can lock in a set mortgage payment, renters are at the mercy of these rising costs for the foreseeable future.

So, what’s the better choice for you? There’s a lot to consider when it comes to buying versus renting. Luckily, you don’t have to do it alone. Reach out to schedule a free consultation and we’ll help walk you through your options. You may also find it helpful to ask yourself the following questions:

1. How long do I plan to stay in the home?

You’ll get the most financial benefit from a home purchase if you own the property for at least five years.³ If you plan to sell in a shorter period of time, a home purchase may not be the best choice for you.

There are costs associated with buying and selling a home, and it may take time for the property’s value to rise enough to offset those expenditures.

Even though housing markets can shift from one year to the next, you’ll typically find that a home’s value will ride out a market’s ups and downs and appreciate with time.⁴ The longer you own a property, the more you are likely to benefit from its appreciation.

Once you’ve found a community that you’d like to stay in for several years, then buying over renting can really pay off. You’ll not only benefit from appreciation, but you’ll also build equity as you pay down your mortgage – and you’ll have more security and stability overall.

Also important: If you plan to stay in the home for the life of the mortgage, there will come a time when you no longer have to make those payments. As a result, your housing costs will drop dramatically, while your equity (and net worth) continue to grow.

2. Is it a better value to buy or rent in my area?

If you know you plan to stay put for at least five years, you should consider whether buying or renting is the better bargain in your area.

One helpful tool for deciding is a neighbourhood’s price-to-rent ratio: just divide the median home price by the median yearly rent price. The higher the price-to-rent ratio is, the more expensive it is to buy compared to rent.⁵ Keep in mind, though, that this equation provides only a snapshot of where the market stands today. As such, it may not accurately account for the full impact of rising home values and rent increases over the long term.

According to data from the Canadian Real Estate Association, a homeowner who purchased an average-priced Canadian home 10 years ago would have gained roughly $285,000 in equity — all while maintaining a steady mortgage payment.^6,7

In contrast, someone who chose to rent during that same period would have not only missed out on those equity gains, but they would have also seen average Canadian rental prices increase by around 34%.⁸

So even if renting seems like a better bargain today, buying could be the better long-term financial play.

Ready to compare your options? Then reach out to schedule a free consultation. As local market experts, we can help you interpret the numbers to determine if buying or renting is a better value in your particular neighbourhood.

3. Can I afford to be a homeowner?

If you determine that buying a home is the better value, you’ll want to evaluate your financial readiness.

Start by examining how much you have in savings. After committing a down payment and closing costs, will you still have enough money left over for ancillary expenses and emergencies? If not, that’s a sign you may be better off waiting until you’ve built a larger rainy-day fund.

Then consider how your monthly budget will be impacted. Remember, your monthly mortgage payment won’t be your only expense going forward. You may also need to factor in property taxes, insurance, association fees, maintenance, and repairs.

Still, you could find that the monthly cost of homeownership is comparable to renting, especially if you make a sizable down payment. Landlords often pass the extra costs of homeowning onto tenants, so it’s not always the cheaper option.

Plus, even though you’ll be in charge of financing your home’s upkeep if you buy, you’ll also be the one who stands to benefit from the fruits of your investment. Every major upgrade, for example, not only makes your home a nicer place to live; it also helps boost your home’s market value.

If you want to buy a home but aren’t sure you can afford it, give us a call to discuss your goals and budget. We can give you a realistic assessment of your options and help you determine if your homeowning dreams are within reach.

4. Can I qualify for a mortgage?

If you’re prepared to handle the costs of homeownership, you’ll next want to look into how likely you are to pass Canada’s mortgage stress test and get approved for a mortgage.

Every borrower who applies for a mortgage from a federally-regulated lender, such as a bank, must pass a mortgage stress test – even if you have an ample down payment. (Some smaller lenders that aren’t federally regulated, such as credit unions, may also put your mortgage application through a stress test, but they aren’t required to do so.)⁹

To conduct the test, a lender will consider your qualifying income, estimated expenses (such as condo fees or non-mortgage-related debt), and prospective mortgage amount and calculate whether you’d still be able to afford the mortgage if your rate rose by a certain amount. You can also conduct your own mock stress test by inputting some income and expense estimates into the Government of Canada’s Mortgage Qualifier Tool.¹⁰ However, be aware the government’s minimum qualifying interest rate could change by the time you’re ready to buy.

Every lender will also have its own approval criteria separate from the feds’ minimum. But, in general, you can expect a creditor to scrutinize your job stability, credit history, and savings to make sure you can handle a monthly mortgage payment.

For example, lenders like to see evidence that your income is stable and predictable. So if you’re self-employed, you may need to provide additional documentation proving that your earnings are dependable. A lender will also compare your monthly debt payments to your income to make sure you aren’t at risk of becoming financially overextended.

In addition, a lender will check your credit report to verify that you have a history of on-time payments and can be trusted to pay your bills. Generally, the higher your credit score, the better your odds of securing a competitive rate.

Whatever your circumstances, it’s always a good idea to get preapproved for a mortgage before you start house hunting. Let us know if you’re interested, and we’ll give you a referral to a loan officer or mortgage broker who can help.

5. How would owning a home change my life?

Before you begin the preapproval process, however, it’s important to consider how homeownership would affect your life, aside from the long-term financial gains.

In general, you should be prepared to invest more time and energy in owning a home than you do renting. There can be a fair amount of upkeep involved, especially if you buy a fixer-upper or overcommit yourself to a lot of DIY projects. If you’ve only lived in an apartment, for example, you could be surprised by the amount of time you spend maintaining a lawn.

On the other hand, you might relish the chance to tinker in your very own garden, make HGTV-inspired improvements, or play with your dog in a big backyard. Or, if you’re more social, you might enjoy hosting family gatherings or attending block parties with other committed homeowners.

The great thing about owning a home is that you can generally do what you want with it – even if that means painting your walls fiesta red one month and eggplant purple the next.

The choice – like the home – is all yours.

HAVE MORE QUESTIONS? WE’VE GOT ANSWERS

The decision to buy or rent a home is among the most consequential you will make in your lifetime. We can make the process easier by helping you compare your options using real-time local market data. So don’t hesitate to reach out for a personalized consultation, regardless of where you are in your deliberations. We’d be happy to answer your questions and identify actionable steps you can take now to reach your long-term goals.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources:

1. Canadian Real Estate Association (CREA) –
   https://stats.crea.ca/en-CA/
2. Financial Post –
   https://financialpost.com/real-estate/nowhere-to-live-rents-in-canada-surge-as-home-prices-fall
3. Wealthsimple –
   https://www.wealthsimple.com/en-ca/magazine/buying-vs-renting-your-home
4. Trading Economics –
   https://tradingeconomics.com/canada/housing-index
5. Investopedia –
   https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
6. CBC –
   https://www.cbc.ca/news/business/average-home-price-ticked-2-lower-in-july-1.1281984
7. Canadian Real Estate Association (CREA) –
   https://stats.crea.ca/en-CA/
8. CMHC –
   https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=Country&GeographyId=1&CategoryLevel1=Primary%20Rental%20Market&CategoryLevel2=Average%20Rent%20%28%24%29&ColumnField=2&RowField=TIMESERIES#timeperiod
9. Government of Canada –
   https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preparing-mortgage.html
10. Financial Consumer Agency of Canada –
    https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx

Our nation is in the midst of a shifting real estate market. But even as the buying frenzy begins to slow, many properties are still receiving multiple offers.¹

So what’s the best way to compete as a buyer–especially if you’re wary about overpaying?

While a high offer price gets attention, most sellers consider a variety of factors when evaluating an offer. With that in mind, here are five tactics you can utilize to sweeten your proposal and outshine your competition.

We can help you weigh the risks and benefits of each tactic and craft a compelling offer designed to get you your dream home—without giving away the farm.

1. Demonstrate Solid Financing

The reality is, no one gets paid if a home sale falls through. That’s why sellers (and their listing agents) favour offers with a high probability of closing.

Sellers particularly love all-cash offers because there’s no chance of financing issues cropping up at the last moment. But all-cash offers are rare, and if sellers are assured that financing will come through, buying with a mortgage doesn’t have to be a disadvantage.

The most important step you can take as a buyer is to get preapproved before you start looking for homes. A preapproval letter shows sellers that you are serious about buying and that you will be able to make good on your offer.²

It’s also important to consider the reputation of your lender. While sellers may not know or care about a lender’s reputation, their agents often do. Some lenders are much easier to work with than others. If you’re unsure who to choose, we are happy to refer you to reputable lenders known for their ease of doing business.

2. Put Down a Sizeable Deposit

Buyers can show sellers that they’re serious about their offer and have “skin in the game” by putting down a large deposit. This, however, is not the same as a down payment.

The deposit is typically held in a trust account by the seller’s brokerage or lawyer.³ If the purchase goes through, it is applied to the down payment and closing costs. If the sale falls through, however, the buyer could lose some or all of that deposit, depending on the contract terms.

Deposit amounts vary, but offering a higher deposit can help demonstrate to the buyer that you are serious about the property. We can help you determine an appropriate deposit to offer based on your specific circumstances.

3. Ask for Few (or No) Conditions

Most real estate offers include conditions, which are clauses that allow one or both parties to back out of the agreement if certain requirements are not met. These conditions appear in the purchase agreement and must be accepted by both the buyer and seller to be legally binding.

Two of the most common conditions are:⁴

• Financing: A financing condition gives the buyer a window of time in which to secure a mortgage. If they are unable to do so, they can withdraw from the purchase and the seller can move on to other buyers.
• Inspection: An inspection condition gives the buyer the opportunity to have the home professionally inspected for issues with the structure, wiring, plumbing, etc. Typically, the seller may choose whether or not to remediate those issues; if they do not, the buyer may withdraw from the contract.

Since conditions reduce the likelihood that a sale will go through, they generally make an offer less desirable to the seller. The more conditions that are included, the weaker the offer becomes. Therefore, buyers in a competitive market often volunteer to waive or exclude certain conditions.

However, it’s very important to make this decision carefully and recognize the risks of doing so. For example, a buyer who chooses to waive a home inspection condition may find out too late that the home requires extensive renovations. If you back out of a home purchase without the protection of a condition, you could lose your deposit.⁵ We can help you assess the risks and benefits involved.

4. Offer a Flexible Closing Date

When it comes to selling a house, money isn’t everything. People sell their homes for a wide variety of reasons, and flexible terms that work with their personal situations can sometimes make all the difference. For example, if a seller is in the process of planning a significant move, they may appreciate an option to advance or postpone their closing date.

This flexibility can provide a powerful advantage for first-time homebuyers. If you have a month-to-month or easily transferable lease, for example, you may be able to offer a more flexible timeline than a buyer who is simultaneously selling their existing home.

Of course, the value of these terms depends on the seller’s situation. We can reach out to the listing agent to find out the seller’s preferred terms, and then collaborate with you to write a compelling offer that works for both parties.

5. Work With a Skilled Buyer’s Agent

In this real estate market, one of the greatest advantages you can give yourself is to work with a skilled and trustworthy real estate professional. We will make sure you fully understand the process and help you submit an appealing offer without taking on too much risk.

Plus, we know how to write offers that are designed to win over both the seller and their listing agent. The truth is, listing agents play a huge role in helping sellers evaluate offers, and they want to work with skilled buyer’s agents who are professional, communicative, and courteous.

Once your offer is accepted, we’ll also handle any further negotiations and coordinate all the paperwork and other details involved in your home purchase. The best part is, you’ll have a knowledgeable, licensed advocate on your side who is watching out for your best interests every step of the way.

Helping You Get to the Right Offer

In many cases, a competitive offer doesn’t need to be condition-free or significantly above asking price. But if you’re serious about buying a home in today’s market, it’s important to consider what you can do to sweeten the deal.

If you’re a buyer, we can help you compete in today’s market without getting steamrolled. And if you’re a seller, we can help you evaluate offers by taking all the relevant factors into account. Contact us today to schedule a free consultation.

Sources:

1. Bloomberg –
   https://www.bloomberg.com/news/articles/2022-04-12/home-prices-could-start-to-cool-in-canada-s-hot-housing-market
2. NerdWallet –
   https://www.nerdwallet.com/ca/mortgages/what-is-mortgage-pre-approval
3. Nesto –
   https://www.nesto.ca/mortgage-basics/house-deposit-vs-down-payment/
4. Real Estate Council Alberta –
   https://www.reca.ca/2020/02/05/conditional-sales/
5. Loans Canada –
   https://loanscanada.ca/mortgage/what-happens-when-you-walk-away-from-your-offer-on-a-house/