Is it wise to buy or sell real estate when the mortgage interest rates are currently significantly higher than early last year?
The short answer is YES.
The Bank of Canada policy rate was abnormally low over the last couple years creating a frenzied real estate market. Since then, it has gone up. 8 times! So why is it a 'yes' to buy?
BUYERS: You can't time the market. Many buyers are now waiting until the interest rates go down before they buy. But when the rates were low last year, many waited for the prices to go down and the bidding wars to stop. So when is it a good time to stop waiting?
If you are ready to buy, you found a suitable property, you have the funds and you have secured the financing, it could be detrimental if you wait for a different market if even one of those aspects has changed.
Also, real estate is not only about the financial gains and losses as one would think of with stocks and bonds for example. In most cases it is a home or a business. A home provides shelter and a business can provide financial security. It is difficult to place a numerical value on these benefits to ownership.
SELLERS: Many sellers cannot come to terms with the prices being lower than the year before when every house appeared to be selling over list after a few days with an offer date and in some cases, several multiple offers.
Now sellers have to contend with prices that have dropped and properties that are not moving as fast. Shouldn't property prices be going up year after year? Nope. Not really. The price increases in 2021 and early 2022 were inflated and unsustainable. If you sold a property during this time and didn't have to buy another, then congrats! You made out like a bandit!
But an inflated market is no good for anyone. I have children. It would be nice if they can afford to buy a home someday. And move out! (o:
Real estate over the years has been one of the most secure investments. Prices may dip, but over the long term, they have increased exponentially.
This is why when many realtors are asked, when is it a good time to buy? The answer is always NOW. Because who knows what is coming next? And since real property is such a solid investment, (no pun intended), especially over a significant period of time, a few fluctuations won't make a huge dent in your equity.
However, the difference between this market vs last year cannot be ignored. This market is currently great for buyers looking for lower prices than last year. Investors know that it is better to purchase at a lower price with a high interest rate than at a higher price with a low interest rate. Rates are subject to change. Price is unchangeable.
Sellers can also have confidence that they will be able to sell for the best price in a market where there are not enough properties available for sale. The higher interest rates also have many sellers delaying listing in fear of low-ball offers. This has created somewhat of a lack in inventory. So prices may have dipped, but it's not a fire sale. And it varies with each location, seller and property.
Overall, the GTA and surrounding areas are in high demand as this is a destination for many people to live and do business. If you have a desirable property, no need to fear! It will sell for what the market can bear.
However, let's hope that soon the interest rates that have gone up, will come down!