Cooling housing market chills home buyers and sellers

How does a falling real estate market affect buyers and sellers?

A variety of factors, including higher interest rates, rising inflation and rising costs of living, have all played a role in cooling much of Ontario’s housing market.

Financial institutions have recently reported that rising interest rates are pushing up the stress test eligibility rate for a mortgage. The stress test is a calculation that lenders use to determine if a buyer is able to qualify for a certain mortgage, and it automatically includes an interest rate at a higher level. Using a higher rate is used to assess a buyer’s ability to make mortgage payments if the interest rate increases.

Now, with interest rates rising, an even tougher stress test means the number of people eligible for a mortgage and the amount they are approved for will likely shrink.

It is important to point out that property values ​​fluctuate over time, sometimes with sharp increases and decreases. Although economists generally have differing opinions on how long house prices will fall or rise, it is difficult to guarantee projections with certainty, as they can be influenced by many global factors.

If you’re looking to buy a home in Ontario, the conditions leading to lower prices can work in your favour. However, no one knows how far the market could go. Depending on your neighborhood preferences, you may be able to find a property for less than it would have sold just a few months ago. Plus, you may have more opportunities to negotiate terms to your advantage, such as having your home inspected or obtaining financing.

If you are looking to sell your property, however, this may be a less favorable time. Depending on the type of home you own or its location, you may not see competing offers as often as you have in recent years.

It’s understandable if you wonder if now is the right time to go ahead and list your property – or if it would be better to wait for the real estate landscape to change. The short answer is that much will depend on each individual’s personal and financial goals and circumstances.

Here are some questions to consider:

  • What drives your decision to sell? Is it because you bought another house and want to avoid having two mortgages at the same time? Are you looking to move to another city for work or to be closer to your family? Are there other personal reasons behind your decision?
  • Do your finances allow you to keep your property a little longer? Is your schedule flexible?
  • If you move to another property, can you rent out your home and revalue the market in the next few years?
  • Are you looking to make as much equity as possible, or do you have an amount that you will just settle on?

Everyone’s situation is different, so answering these questions can help you make a more informed decision. I also highly recommend consulting a real estate agent who is knowledgeable and experienced in real estate transactions in your area.

If you have a question about the process of buying or selling a home, please email [email protected]

Joe Richer is Registrar of the Real Estate Council of Ontario (RECO). This column is for general informational purposes only and is not intended to provide legal or professional advice on real estate transactions. Follow RECO on Twitter: @RECOhelps

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