June 8 2020

Is Now The Time to Buy?

homebuyer

Even under normal circumstances, purchasing a new home is a big life step and can be very stressful. With that being said, we understand why you might be reluctant to make such a big decision during this uncertain time. Though we can’t predict the future, if you are considering purchasing a home for the first time or you are looking to upgrade your home, now might be the perfect time to do so! Please continue reading to learn more about why real estate professionals and ourselves are saying that now is the time to buy.

According to Morrison Home’s CEO, Dave Gladney, “there are two main reasons that now is a good time to buy. First, the prices for new homes are very low, and second, the cost to borrow money has never been lower.” Let’s examine these reasons further: 

The prices for new homes are very low: 

Before we had even heard of ‘coronavirus’, Alberta had already experienced a drop in average home prices due to a decrease in housing demand. The COVID-19 outbreak has slowed down Alberta’s real estate markets even further; pushing the prices for new homes even lower. According to Liv Real Estate, “383 sales were reported in Edmonton in April, down 50% from last April”, and these trends are expected to continue until social distancing measures are lifted.

What does this mean for a first time home buyer? 

This means that you can buy your first home for an even lower price in this “buyer’s market”. 

What does this mean for someone looking to upgrade their home? 

As explained by Dave Gladney, “the best time to buy is when the market is down. The resale housing market and new home market move together. So when people say ‘my home is worth less than it was a year ago’, so are new homes, and the difference required to upgrade your home is always less in a down market”. See this visual example here by Morrison Homes for further details. 

The cost to borrow money has never been lower:

Over the past few months, the Bank of Canada has significantly lowered the interest rate in response to the COVID-19 pandemic. According to RE/MAX Canada, “in March, The Bank of Canada had slashed the rate from 1.75% to 1.25% which had ignited activity in home purchases especially in more expensive markets. Since then they have made even more reductions. Currently, the benchmark rate sits at 0.25%, the lowest it’s ever been.” 

This decision was made to lessen the negative impact that the outbreak will have on our economy. Lower interest rates incentivise people to borrow money and therefore to make big purchases with debt (such as buy a house), and this in return, puts money back into the economy and helps stimulate the economy as a whole.

What does this mean for a first time home buyer? 

In 2017 the Canadian government implemented the “mortgage stress test” which is a calculator that determines whether or not you can qualify for a home mortgage based on your income and expenses. Lower interest rates mean lower mortgage payments; this means that many first-time homebuyers, who previously might not have passed the stress test, may now be able to qualify for a mortgage. Additionally, lower interest rates mean that you will pay much less interest over time. 

What does this mean for someone looking to upgrade their home? 

Similar to the first-time homebuyer, lower interest rates means that you may be able to qualify for a larger mortgage than previously before. Secondly, when upgrading your home, you will end up paying much less in interest over time and may be able to negotiate better terms on your mortgage. 

As Dave Gladney explained, “it’s impossible to say when we are at the bottom, but we do know we are on the right side of the buying curve. The only way to know when the market has bottomed out is when you see a price increase and by then it’s too late.” 

We hope that this blog has given you some insight into Edmonton’s real estate market. As your health and safety is our utmost priority, we strongly encourage you to take all possible precautions when looking for a new home, and to take advantage of our builders’ online resources. Learn more about our home builders and the variety of new home options offered in McConachie.

A big thanks to everyone for doing their part to flatten the curve. Stay safe, calm and healthy! 

 

 

 

 

Resources: 

COVID-19 Takes a Bite Out of the Real Estate Market in April 

How You Can Benefit From Low Interest Rates And A Buyers Market

Is it a Good Time to Buy a House for the First Time?