Buy a House in 2024 or Wait Until Rates Have Decreased?

Following the COVID-19 pandemic, many Canadians found themselves on the sidelines of the rapidly-changing real estate landscape. Now, four years post-pandemic, the macro-economic environment has slowly begun to stabilize, leaving many wondering if it is time to buy a home. Will house prices go down in 2024? Where can we expect interest rates to go? In this guide, we hope to explore the complexity of this issue from many angles to help arm you with the information you need to be successful in the modern housing market.

Pros and Cons of Buying a House in 2024

While it is impossible to truly predict whether 2024 is the best time to buy a home, here are some potential pros and cons to consider:

• PRO: Increase Your Equity. The sooner you buy a home, the sooner you can begin building equity. When you pay your mortgage, part of your monthly payment goes only to your lender (interest payment), but the rest of it (principal) becomes equity. If you would like this money back at a later time, you can take out a loan against your equity, or simply sell your home. On the other hand, if you are paying rent for a property you do not own, you are not getting that money back. It is going entirely to your landlord. Every month that you pay your rent, instead of a mortgage, represents a loss of net worth.
• PRO: Bargaining Power. Currently, the Canadian real estate landscape remains somewhat balanced between a buyer’s market and a seller’s market. Many Canadians may be hesitant to buy due to high rates or market uncertainty. This means that sellers are more likely to allow you to negotiate for a better price. If interest rates drop, the market will become flooded with new buyers and you will lose your bargaining power.
• CON: Difficult to Qualify. Given high interest rates and demanding stress test requirements, many Canadians are simply unable to qualify for their desired homes in the current market. You may qualify for a nicer home by waiting until standards decrease, or your income and credit score increase.
• CON: Uncertainty. Buying a home in 2024 comes with a certain level of uncertainty. Will you lock in a high interest rate just months before they drop? Will home prices plummet in the next few years due to policy changes? While a disastrous scenario is unlikely, you do have to assume a certain level of risk when making this decision.

Interest Rate Dynamics: Considerations for Timing Your Home Purchase

In an ideal world, you would purchase a home at a time when interest rates were low enough to be affordable, but not so low that home prices jump even higher as a result. The most difficult part of this equation is predicting when this will occur. However, there are a few strategies you can employ to stay ahead of market fluctuations.

Firstly, you may want to monitor changes to the interest rate environment. You can access live interest rates online across any of the big bank websites, or refer to press releases whenever there is a hike or a drop announced by the BoC. Monitoring these trends, patterns, and market cycles will allow you to get ahead of the curve and can significantly impact your purchasing power.

Additionally, you can also track home prices in your area or province through a number of different site or organizations. Simply look up your desired region on any listing website, and compare home sizes, amenity offerings, and price points. You can also refer to CREA (The Canadian Real Estate Association) metrics for more general data on average prices per province or city. This may allow you to find the best time to enter the market.

Strategies for Deciding When to Buy a Home

When deciding when to buy a home, interest rates may not be the only factor you want to consider. In fact, there are a number of unexpected drivers of home prices that, if understood, may allow you to buy your dream home at the best price possible.

One important consideration is the season in which you want to purchase your home. While home prices are cyclical across periods of many years, they are also seasonally cyclical within any given year. In Canada, home sales typically increase in spring and summer, and decrease in the winter and fall. Winter is often an unpopular time for sellers to list their homes due to the cold weather and poor curb appeal. Furthermore, many buyers and sellers alike are busy with the holiday season and may not be thinking about buying or selling a home. On the flip side, summer weather is ideal for hosting open houses, and green grass lawns can certainly boost the perceived appeal of a home. As demand for homes falls in certain seasons, the home price will also fall— sellers frequently become more willing to negotiate. As such, you may find home prices to be lower in the fall and winter seasons, so long as the surrounding macroeconomy has remained stable throughout the year.

Another consideration might be the area in which you choose to buy your home. As the Canadian population continues to grow, especially in Ontario, urban and suburban expansions continue to progress along the outskirts of the GTA. The less developed a community is, in terms of the infrastructure that has been built, the lower the home prices will be. You can often save on the cost of a home by buying a home ahead of the expansion of the community, and watching the town develop around you over the next couple of years.

Another important strategy is to seek guidance and advice from a team of trusted real estate experts. Real estate agents may be able to direct you to the best home prices, be it based on location, season, or features. On the other hand, mortgage brokers may be able to best direct you in terms of interest rates, to ensure you maximize your savings. At Clover Mortgage, we can help connect you with the lowest rates, and lock them in for up to 120 days. Contact us to book your free consultation today!