Should I buy a home in 2022?

A report published by the national mortgage industry association (March 2022), Mortgage Professionals Canada, showed that 29 percent of Canadians think this is a good time to purchase a home. That's the lowest number recorded in this country's history. Mortgage Professionals Canada Housing Market Report

However, this number is not surprising when you consider that homebuyers have faced a very fast-paced and competitive market over the past few years. Many have felt overwhelmed by spiralling home prices and a lack of supply.

Rising interest rates have led to the end of Canada's pandemic housing boom. Since the Bank of Canada began its rate hikes, home sales (resale properties) in Canada have dropped by over 30 percent and the benchmark price by approximately 6 percent. We have seen the most significant drops in British Columbia and Ontario.

Robert Hogue, an assistant chief economist at RBC, said that the bottom of Canada's housing correction is "still a ways away." RBC Report as we see Canadian home sales fall for the fifth month.

Uncertainty in the market seems to be a continuing theme among economists and industry professionals. So, what does it mean to you? Are you sitting on the fence about whether to buy a home now? The answer to that question depends upon your situation. I believe it is a good idea for most Canadians to own real estate if it makes sense financially.

Rate increases will impact first-time buyers the most. While rising interest rates may cause housing prices to decrease or level off, higher rates will also reduce your buying power and increase the cost of borrowing.

Things to consider:

• Do you have a down payment saved up?
• Will the price of the home that you want to purchase increase?
• As rates increase, will you qualify for less in the future and will cost go up if you wait?
• Is home ownership more beneficial than renting? With increasing inflation, rental costs are going up. The median rent for a one-bedroom unit in Vancouver has risen to $2,240, and year-over-year rent has increased by 14.9 percent. For a two=bedroom unit in Vancouver, median rent has increased 20.9 percent yearly. Rental prices have increased.
• Homeownership allows you to build equity.
• Are you planning to stay in the home or hold onto it as an investment for a while?
• Is inventory in your area on the rise?

Real estate continues to be a good investment in Canada when done right. Although the real estate market has cooled with increasing rates, remember that the benchmark price for all property types in Greater Vancouver is still 10 percent higher than in July 2021. Although rising rates have reduced the frenzied buyer demand we experienced over the past two years, it will not ease the housing supply issues in Canada. What we are seeing now may be just an "easing of symptoms" (according to CIBC) of the hot real estate market for a short period. Higher rates may not cure the housing market. TD has forecasted a price drop of 19 percent, peak to trough, throughout 2022Q1-2023Q1. "However, home prices are expected to grow modestly after that, alongside some recovery in demand." TD Housing Outlook

While no one has a crystal ball, many economists and industry experts agree that Canada will experience housing market price drops of approximately 19 to 23 percent. They also seem to agree that the regions that have experienced the most significant price swings will face the most extensive corrections. We have already experienced part of that correction. However, this easing will not solve Canada's ongoing supply issues. In Budget 2022, the federal government acknowledged that Canada faced a housing shortage and explained that it would need to double housing units per year over the next decade to meet the demands of Canada's growing population.

According to economists at Desjardins, the pace of decline in housing sales has cooled since accelerating in the spring. Despite the double-digit price corrections that much of Canada has experienced, prices remain higher than pre-pandemic levels. Financial Post housing report

The CMHC sees the average home price bottoming out in the second quarter of 2023 and then rebounding in the second half of 2023 and into 2024. The CMHC also predicts that the average home price will surpass this year's peak by 2025.

If you're unsure what the best option is, scrutinize your local market. We are all influenced by national media headlines. Still, local markets vary, so seek the advice of an expert real estate agent and mortgage professional to help guide you to your best personal decision.