Are Buyers In the Driver’s Seat Again? And What That Could Mean For You

Have you been searching Realtor.ca, driving by homes for sale, or even visiting open houses with the dream of becoming a homeowner here in Sudbury, Ontario? If you’ve been putting off buying a home in the uncertain economic landscape, now may be the time you’ve been waiting for. After years of a seller’s market where it was difficult and sometimes impossible for buyers to find their dream home, the trend is shifting in the buyers’ favour. Our team of local real estate experts know the market inside and out, and are in a great position to give you advice specific to the unique scenario you may find yourself in. 

Why Now May be the Time to Buy

As a home buyer, or one of our 5 Bullet Friday newsletter readers, I'm sure you're aware that Tiff Macklem at the Bank of Canada continues to increase interest rates, which reduces affordability. What a lot of buyers may not realize is that some changes in the housing market shift may be beneficial to them. After a couple of years where homes went off the market just days after being listed, they are now sitting on the market longer. Instead of selling in days or a couple of weeks, you see homes in some areas listed for more than a month; even a lot of homes failing to sell!

With it taking longer for the properties to sell, often this will lead to lower prices for sellers. Price reductions help out buyers who may have a tight budget. The cost of everything, from gas to groceries and rent have made everyone’s budgets tighter, which may mean that homeowners decide to sell if they have more homes than they can comfortably afford. More homes on the market also lowers the price, benefiting buyers.

Variable and fixed mortgage rates have reached the 6% mark for the first time since 2008. With higher rates, buying a home today is often less appealing and more expensive than a couple of years ago. This leads to fewer buyers feeling confident in making a significant investment now, knowing that a recession could lead to job loss and even tighter finances.

More Options for Buying a Home

If you’re one of the home buyers looking for a property in Sudbury amid economic uncertainty, you’ll be happy to know that options exist to help you get into a new home you can afford. More buyers are turning to adjustable-rate mortgages to lower their monthly payments and qualify for more homes.

An adjustable-rate mortgage (ARM) allows you to get into a home at a lower interest rate than a fixed interest rate mortgage. Adjustable-rate mortgages charge a lower interest rate now than fixed loans with the ability to change the rate in a specific time period. For instance, a 5/1 ARM means that in five years, the interest rate will adjust to whatever is current at that time.

Buyers can benefit from an ARM in today’s market because it increases their buying power. If the interest rates go down in five years or whenever the rates on an ARM adjust, the buyer will lower their payments.

Adjustable-rate mortgages differ from variable rates; as the payments will adjust in line with the interest increases. Most people love having the goal of paying down a mortgage and building that equity over the term of their mortgage (say 5 years). If you take out a traditional variable rate, if interest rates increase they will shift your payment to cover more interest and less principal (which results in less debt being paid down, and smaller amount of equity built up). 

Ways to Reduce the Cost of Buying a Home

You don’t have to let the rising interest rates keep you from buying a home now if you’re ready. You can take steps to make it easier to get an affordable loan. For example, make sure you have excellent credit to get the best interest rates. Come up with a larger down payment to reduce the interest rate on your mortgage. Because you’re assuming more risk, lenders are often willing to negotiate.

Fewer buyers are willing to forego their real estate conditions (can you picture not having a home inspection when trying to buy a home).  When buyers are shopping in this shifted marketplace there is often ample opportunity for buyers to put offers that have these protections and conditions built into their contracts.  We have seen the return of offers conditional on buyers being able to sell their home as well; a huge shift from just a few months ago.

If you’re a first-time buyer, you have access to various first-time buyer programs. These programs provide you with assistance for your closing costs. Your real estate agent can point you toward what programs are available that will help make your home more affordable (land transfer tax credits, RRSP loans, Government matching programs just to name a few).