Should you buy a home now, or wait until later? When is the best time to buy a home? What market conditions are ideal for home purchases?
These are common questions that potential homebuyers have when faced with making what could possibly be the largest purchase of their lives. While there are no easy answers, there are some important factors to consider when thinking about the timing of a home purchase.
Looking at Market Conditions
One of the only things certain about most markets is that they are often uncertain, and the housing market is no different.
In times when housing sales and prices increase steadily, it’s a lot easier for buyers and sellers to have confidence in both the market and their decisions surrounding real estate. But strong housing markets don’t last forever, and once housing prices and sales start to decline rapidly, so too can the confidence of buyers and sellers.
Take, for example, the case of Toronto and Vancouver in 2014-2015. Prices for Vancouver homes for sale and Toronto homes for sale began to increase significantly around this period. However, once the provincial and federal governments put measures in place to rein in the explosion in housing prices, both sales and prices began to fall in B.C. in 2016, in Ontario in 2017, and nationwide last year.
Declining prices often lead potential buyers to question whether it’s the right time to make a move, as they may be able to buy lower in a shakier market, and sell higher once things are looking up again.
It may seem logical to time housing purchases for a buy low/sell high scenario. But the complexity of real estate transactions – thanks to things like logistics and costs related to searching and completing a transaction – can make it difficult to determine the best time to pull the trigger on a purchase.
Another important thing to consider is the localized nature of housing markets. What’s happening in large cities like Toronto and Vancouver might not reflect what market conditions are like in other areas of the country. For example, when home prices and sales were decreasing rapidly in Vancouver and Toronto over the past few years, Montreal homes for sale were in different market conditions completely.
It’s important to take note of local market conditions rather than relying solely on conditional information from other cities and regions when considering whether it’s a good time to purchase a home.
Understanding Personal Circumstances
Individual or family circumstances often motivate buyers in terms of when and why they purchase a home. Potential buyers might be current renters who are looking to make the transition to owning a property. Or perhaps they are a current homeowner looking to upsize or downsize because of a life change, like starting a family or becoming empty nesters.
These personal circumstances can influence a buyer’s decision about not only the type of property they are looking to purchase, but also how much they can or are willing to spend, as well as when they are looking to buy.
Sellers, too, have personal circumstances that may determine when they decide to sell and for how much. This can sometimes make it tricky for buyers and sellers to find a good match in the housing market.
People with children are a good example of how personal circumstances can dictate the type of home required, the costs involved, and the timing of the purchase.
Parents are more likely to purchase a home earlier in the year to ensure their family is settled before school starts in the fall. The size of the family will also determine what type of home they will select (number of bedrooms, size of the backyard, etc.). If they are able to, they may decide to wait until later in the summer to see if prices decrease before selecting a home.
But sellers also consider timing. They may decide to wait for an increase in home prices before listing their home, possibly leading to a narrower selection of home options for buyers when the market is less stable.
Purchasing Investment Properties
Investment properties bring with them a host of other considerations. Lower vacancy rates can drive up prices due to increased demand, but as the number of new multi-family residential buildings increase and vacancy rates rise, rent could also decrease.
It’s also important to know whether the amount of rent charged will cover the costs involved in an investment property. A group of investors can purchase condos in the construction stage, for instance. However, if the rent they charge later on cannot fully cover property taxes, mortgage payments, and maintenance fees for the investment property, the entire project becomes unprofitable.
With so much advice available online about market conditions and the ideal timing for real estate purchases, it can be difficult to navigate and get a full picture of what’s best for you. Most real estate purchases can present at least some risk, but focusing on local market conditions and having a good understanding of your personal circumstances will undoubtedly help you decide whether it’s best to buy now or wait until later.