With sky-high housing prices in many real estate markets – a recent Vancity study predicts that without intervention the average detached home in Vancouver will cost $2.1 million by 2030 – many young Canadians struggle to buy their first home despite record low interest rates.
And when one segment of the housing market stalls, it can stymie move-up buyers and downsizers who can’t sell their homes. That’s particularly problematic for retirees who’d counted on home equity to fund their retirement.
Signs of a price correction
According to the article: “Some markets across the country are showing signs of a price correction – not the juicy price declines that first-time buyers have been hoping for, but still something.
“Combine this with the mediocre short-term economic outlook and you get market conditions that could finally start to shift some advantage away from people who have owned their homes for ages to young buyers.”
The Globe and Mail’s Rob Carrick goes on to cite multi-month price declines in markets including Montreal, Winnipeg and Calgary. Notably missing from that list? Vancouver, of course.
It’s tough to say whether these price declines will continue and whether that will be enough to have a meaningful impact on first-time buyers (and if Vancouver is headed for a price correction, as some predict). Either way, here are a few things to keep in mind:
1. Consider your situation, not just market conditions.
If you’re in a position to take advantage of low interest rates and lower housing prices, that could be a smart move. But remember it’s impossible to predict the long-term outlook for interest rates and housing prices, so rates could drop even further or they could spike at renewal time.
Don’t rush into home ownership before you’re ready out of fear you’ll miss out on low prices. It’s better to buy when you’re financially ready and plan to stay in the property for at least a few years.
If your situation changes and you decide to sell the property after a short time period, transaction costs would likely cancel out any price gains you’d get, anyway.
2. Options abound for first-time buyers.
If you’re buying a $400,000 home and want to put down at least 20 per cent to avoid mortgage insurance, that’s an $80,000 down payment.
That number may sound intimidating for most first-time buyers, but you have options. Many family members gift money for a first-time buyer’s down payment, and you can borrow money from your RRSP to fund a home purchase.
Several tax credits and exemptions are also designed to help first-time buyers enter the market.