Though we are currently in an economic downturn, many financial experts assert it could not be a better time to buy a home. In fact, this past April, home sales across Canada went up 11.2%, the largest single month-to-month increase in the last five years. If you’re debating turning from renter to homeowner, here are some things to consider before taking the plunge.
Why buy a home during a recession
It’s a buyer’s market. In the world of real estate, there are fewer buyers out there, which meanshouses are sitting on the market a little longer. Sellers are therefore feeling the pressure to lower house prices on their properties. With prices lower today than they were a couple ofyears ago, or even one year ago, potential home buyers may be able to capitalize on the opportunity of snatching up their dream home at a price that would have never been reasonable previously.
Interest rates are at an all-time low.Your monthly mortgage payments may be easier to handle thanks to interest rates currently being incredibly low. To get the lowest rate possible, look for a mortgage broker in your area who can help you find the best deal that fits your income and credit history.
You can start to build equity.Owning a home is one financial milestone that most of us strive for. If you have the financial liquidity (and security) to buy a home, this may be an ideal time for you to get into the real estate market and thus increase your portfolio of assets.
Be sure to also consider…
False bottom concerns. Read the financial section of any major newspaper, and you’re likely to find discussion that most signs point to a housing market which is continuing to spiral downward. If the recession is prolonged, prices may continue to drop even lower. Some home buyers are holding off on their purchases as a result of wanting to see what will happen in the next few months to the next couple of years.
Interest rates may rise.Though interest rates are at their lowest, there is always a chance of them going up again. In fact, since the U.S. is printing so much money in order to control inflation, interest rates are bound to rise along with it. If you do buy a home now, and obtain a fixed rate mortgage, you will likely be in a better position to handle rising interest rates as opposed to the home buyer who negotiates a variable rate mortgage; in this case,once interest rates rise, your monthly mortgage payments will, too.
The flailing job market. Has the particular industry you work in been hit hard by layoffs during this recession?As tempting as it may be to take advantage of the cheap housing prices and low interest rates, if you have job security concerns, be sure to take this into account before putting a down payment on a home.