My partner and I are ready to buy a house. We’ve fallen in love with a home that’s at the very top of our price range. We can manage the carrying costs if we stretch a tiny bit, but wonder if it would be smarter to wait for interest rates to drop before making this type of purchase. – UNSURE
DEAR UNSURE: People are constantly asking me if it’s a good time to buy or sell. Opportunities present themselves no matter what the market is doing, so the ideal time really depends on when circumstances are right for you.
Real estate is one of the best investments you can make, and depending on whether you’re buying or selling, there may be times when you can gain the upper hand. When buyers outnumber sellers and homes are selling like hotcakes, sellers have the advantage. Conversely, when there are plenty of listings and just a few buyers, buyers have the edge. It can be hard to pinpoint the “perfect” time to buy or sell, even as conditions are swinging one way or the other. For example, today’s interest rates are close to what they were two decades ago, but housing prices are nearly four times what they were in the early 2000s.
The line between a “buyer’s market” and “seller’s market” is also increasingly blurry. While current market circumstances seem to be skewed towards buyers, we’re seeing plenty of multiple offers, which typically indicate a seller’s market. With about three-quarters of today’s properties selling at or above their asking price, the strategy of underpricing homes in hopes of generating multiple offers will likely continue no matter how we try to classify the market. Whether it’s a buyer’s market, a seller’s market, or something more balanced, a home that is priced correctly will always sell.
In your situation, financial flexibility offers a distinct advantage. By stretching a bit now to afford the home you want, you may be able to turn short term pain into long term gain. Today’s higher interest rates are holding many buyers back, which means fewer buyers are out shopping for homes. With less competition, you may be able to afford a higher caliber of house than you would in a stronger market. Hypothetically, if interest rates were to drop by half tomorrow, we would expect to see a bit of a buying frenzy. If you can tolerate a higher carrying cost now while purchase prices are lower, you can make the most of your buying power before interest rates calm down and the buyers who’ve been sidelined get back in the game.
PRO TIP: Interest rates don’t drop overnight, they work their way back towards normal in small increments. As this happens, we can expect the real estate machine to wake up and chug back to life, like an historic steam train leaving the station. #Advice #AskDavid #TheNegotiator
David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.