We actually canâ€™t answer that for you because the decision to buy is highly personal, and – is it is your first house, the decision is monumental. We do know that if you are considering buying a new home now, you likely wonâ€™t want to wait. No one wants to wait to start building their dream.
We can share some candid information with you about the economy, how various factors could affect the price of your home and how much you will pay, over time.
Interest Rates & Inflationâ€¦
The Bank of Canada raised interest rates again last month as an attempt to slow inflation. We knew it was coming and some would argue that it needed to be done. Monetary policy and economics can be complicated and not as simple as supply & demand (although that plays into it), so weâ€™ll just hit the highlights.
- Inflation Targeting: Since 1991 (when inflation targeting began in Canada), the Bank of Canada targets inflation to be between 1 to 3%, with 2% being the ideal. They want to keep inflation â€œlow, stable and predictableâ€. Read more about inflation targeting.
- Economists: Are typically able to predict these things and are generally pretty accurate, outside of sudden unexpected events. We attended the Realtorâ€™s Association of Edmonton Housing Market Forecast last month, and all of the economists attending predicted the rate increase. It wasnâ€™t sudden and it wasnâ€™t unexpected, but the economists were all also in agreement that this should be the last rate increase for now.
While it means the cost of borrowing is a little bit higher at the moment, interest rates are expected to come down again over time, with some economists predicting between 1-3% by the end of 2024. [Source: Canada Interest Rate Forecast 2023-2024]
SO – that doesnâ€™t mean you shouldnâ€™t take a mortgage right now (why wait to start living the life you want?); it just means that you if you choose a fixed-rate mortgage, you might want to consider shorter-term mortgages of less than five years, in case interest rates do go lower.
- Fixed and Variable Rate Mortgages: Depends on the rate environment. Read more.
The Stress Testâ€¦
The mortgage stress test was designed to support first time home buyers to ensure that if/when interest rates increase, these buyers are protected and can still afford to pay their mortgage payments. While it might be frustrating if you are on edge of not-qualifying, it should be reassuring to know that if your circumstances change, you can still afford the house youâ€™ve selected.
There are no strategies to improve your score on a stress test. It might mean you need to shift your budget and start smaller or find ways to reduce debt and / or increase your income.
Did you know that there is no national housing market? What is reality in Toronto and Vancouver isnâ€™t relevant to whatâ€™s happening here in Alberta, other than how it affects policy with banks and Canada Mortgage and Housing Corporation (CMHC). Our local Real Estate Boards are continuously advocating to have better regional policies.
Edmonton Housing Marketâ€¦
It’s a buyers market right now, but important to realize these shifts seem significant because 12 months ago we were in a sellerâ€™s market. Neither of those are ideal â€“ weâ€™re looking for a balanced market as a preference for all. Assuming inflation continues to stabilize, it is expected we will move into a balanced market in the region for the all-important spring market.
Read more: Whatâ€™s in store for the Canadian Real Estates Market in 2023? â€“ Realtor.ca
Uncertainty & Building a House in 2023â€¦
The beautiful thing about building modularly â€“ you and your lender will have some peace of mind that from start to finish we can usually be delivering your home within about 8 weeks from deposit (assuming mortgage is approved at that time). That means that if interest rates are fluctuating, your lender isnâ€™t taking a huge risk locking you in.
Wrapping it all upâ€¦
It really is not all doom and gloom. Donâ€™t get sucked into sensationalized headlines. Just do you. Consult with professionals for the very best advice for your situation, but donâ€™t be scared to move forward towards your dream.
- $250K – If you were to buy a $250,000 house right now, with 10% down, it means $1282/month in a mortgage payment at 5.6% interest.
If you would like to speak to a professional mortgage broker or financial planner about all of this, we would be happy to refer you to some folks that understand the uniqueness of modular builds.
If youâ€™d like to explore some more opportunities and questions that you might have â€“ weâ€™re happy to help. Look forward to hearing from you soon.