If trying to time the housing market has you feeling overwhelmed, you\u2019re not the only one. It never seems to be a good time to buy a house \u2013 markets seem to be red hot or freezing cold.<\/p>\n
But you\u2019re going to need somewhere to live, regardless of what\u2019s going on in the economy. And builders are still building and working hard to find ways to get you into their homes, despite rapidly climbing mortgage rates that force buyers to either pay more each month for the house of their dreams or pay less for a house that feels like a compromise.<\/p>\n
The solution to your problem is information \u2013 the better informed you are the better you\u2019ll feel about buying a home in volatile economic times.<\/p>\n
Here\u2019s what to consider when buying in a difficult market.<\/p>\n
How much can you afford to spend on a new house?<\/strong><\/p>\n It seems obvious, but the first question you need to ask yourself is whether you can really afford to buy a house.<\/p>\n Livabl spoke to Nicolette Chapman, mortgage expert and vice president of sales for Zonda about what buyers need to know right now. She says affordability is the most significant thing first-time homebuyers should consider.<\/p>\n \u201cThe cost of living with inflation has made living expenses more challenging,\u201d she said. \u201cBut people still need to concentrate on the number one factor, whether they have enough money.\u201d<\/p>\n Once you decide to buy a house, you might feel the urge to immediately hop online and browse new home listings. But the first step in the homebuying process isn\u2019t looking at new homes \u2013 it\u2019s looking at your finances.<\/p>\n Consider your debt-to-income ratio and credit score. If those still need some work, spend some time chipping away at your debt and boosting your credit score. But don\u2019t be embarrassed if your credit isn\u2019t squeaky clean. Builders and mortgage companies are here to help you.<\/p>\n \u201cA great mortgage company is going to have plans in place that are going to be able to do a run of the numbers,\u201d Chapman says. \u201cIf we look at your credit and pay off your high-interest credit cards, your credit score will jump. At that point, we\u2019ll be able to get you qualified in many situations. It\u2019s attainable in a small amount of time.\u201d<\/p>\n Don\u2019t forget to factor inflation, repairs and utility costs into your budget, too. With costs of living rising across the world, budgets are becoming tighter for everyone. Be realistic with yourself, and don\u2019t forget that paying for a home isn\u2019t just about paying the mortgage.<\/p>\n You decide when it\u2019s the right time to buy a new house<\/strong><\/p>\n Here\u2019s a secret that most Wall Street economists don\u2019t want you to know \u2013 no one can predict how markets will change with 100 per cent accuracy. That makes timing the market impossible \u2013 buy what you can afford when you\u2019re ready to buy.<\/p>\n Simple.<\/p>\n Buying in a complicated market sometimes means making compromises. Your budget and the supply of available housing might be at odds with each other \u2013 which means you may have to expand the boundaries of where you\u2019re looking to buy and how long you\u2019re willing to wait in order to find your perfect home.<\/p>\n Knowing how much you can afford is a game of numbers. But knowing when you\u2019re ready to buy is less cut-and-dry. Here are a few reasons why buying a home might be a good idea :<\/p>\n 1. Your family is expanding and your two-bedroom apartment just isn\u2019t cutting it. <\/em> There\u2019s no mathematical formula to determine whether now is the right time to make a commitment \u2013 so don\u2019t feel like you have to make a decision just because of FOMO. Rather than focusing on what your friends or the latest headlines are saying, assess your personal situation to decide whether it\u2019s the right time to buy.<\/p>\n After all \u2013 it\u2019s your house, your rules.<\/p>\n FOMO vs FOBATT<\/strong><\/p>\n What on earth is FOMO?<\/p>\n It means \u2018fear of missing out\u2019 \u2013 and in the past, that fear dominated the housing market.<\/p>\n Buyers used to rush to purchase anything that hit the market out of fear that prices were accelerating. Today it\u2019s a little different, and buyers are suffering from FOBATT \u2013 fear of buying at the top.<\/p>\n According to Tim Sullivan, a senior managing principal at Zonda, FOBATT is impeding home purchases, as buyers are spending more time waiting for the market to change than they are shopping for homes. The hope is that waiting months or years will mean scoring a better deal on a house, even though that\u2019s not a guarantee.<\/p>\n The message has been heard loud and clear by builders and real estate professionals around the world.<\/p>\n \u201cBuyers today are looking for a deal,\u201d says Zonda\u2019s chief economist Ali Wolf. \u201cThey are saying \u2018I\u2019ll buy today if something makes me feel good about purchasing.\u201d<\/p>\n New home builders understand the FOBATT phenomenon. They are looking at their options and offering potential buyers incentives to buy now. Price drops and favourable mortgage arrangements are just a few tools at the builder\u2019s disposal.<\/p>\n \u201cThey need to get consumers over the mental hurdles,\u201d Wolf says. \u201cWe know that purchasing power has been lost greatly this year ….. that doesn\u2019t mean people won\u2019t buy a home, but what kind of compromises are they willing to make?\u201d<\/p>\n Put your phone away and ask the experts<\/strong><\/p>\n The internet is obsessed with personal finance, and everyone seems to have different advice. Spend your money here, don\u2019t spend it there, make good investments \u2013 the list goes on. On top of that, there\u2019s the ever-mysterious market, which is always \u201cabout to flip\u201d but somehow never in your favour.<\/p>\n It\u2019s no wonder big purchases are stress-inducing. Sometimes it\u2019s easier to procrastinate making choices if the choices are making our stomachs churn.<\/p>\n Brandon Banman, a financial service representative at CIBC says fear of big purchases is common, but there\u2019s still hope for anxiety-riddled buyers \u2013 and it starts with logging off social media.<\/p>\n \u201cWe get a lot of advice from the internet, and I\u2019ve seen plenty of posts online trying to dissuade people from making big purchases,\u201d he said. \u201cBut a lot of those posts come with very little context. Good advice is telling someone to think about whether they really need a $500 pair of shoes that they\u2019ll never really wear anyways. Buying a house is completely different, and no one should be in a moral panic trying to justify how they want to put a roof over their head.\u201d<\/p>\n According to Banman, the best thing you can do when looking to buy a house in a difficult market is to ask for professional advice.<\/p>\n \u201cThere is no bad time to ask for help,\u201d he said. \u201cReal estate is a big market that is full of professionals who can help you figure out what you can afford and where. Even if you\u2019re just thinking about buying a house and have no idea where to start, a financial advisor or a realtor can help you get on the right track.\u201d<\/p>\n Don\u2019t be afraid to buy a new house now<\/strong><\/p>\n As mentioned before, there\u2019s no real way to predict the future with 100 per cent accuracy. Which means no matter how anxious you are about the price of buying \u2013 it can always get more expensive.<\/p>\n That may not be the reassurance you\u2019re looking for. Here\u2019s a hypothetical scenario :<\/p>\n Your budget for a house is $800,000 but the average sold price in your desired area is $785,000. That\u2019s below your budget, but you\u2019d prefer to spend less. You decide to wait a few years, hoping that the average market price will go down. It has to eventually, right?<\/p>\n Fast forward a few years, and now the average sold price in the same neighbourhood is $950,000 \u2013 well over your budget. Now what?<\/p>\n According to Florida-based realtor Jim Woelkers, this is a situation that many find themselves in now that housing prices have been steadily increasing in the wake of the pandemic.<\/p>\n \u201cThis last year we saw buyers really struggle with how fast prices were rising,\u201d he said. \u201cWithin a matter of weeks or months the price of a home could go up, or interest rates could go up.\u201d<\/p>\n But fear of buying at the top can quickly turn into missing your window to enter the market entirely. Remember \u2013 you\u2019re not playing the stock market, you\u2019re investing in a home that is meant to serve you for a lifetime.<\/p>\n \u201cIf you can get in, get in,\u201d Woelkers said. \u201cTiming the market doesn\u2019t work if you plan to live in your home for 10, 15 or 20 years. It\u2019s just about getting your foot in the door when you can afford to do it.\u201d<\/p>\n Buy new, buy quality<\/strong><\/p>\n Interest in new construction homes for sale are trending upward nation-wide as the year goes on. One reason for the sudden increase in interest is the fact that there\u2019s more new homes available \u2013 which means less chance of a bidding war for prospective buyers.<\/p>\n Inventory of new homes for sale has increased by 25% within the year, while the supply of pre-owned homes on the market remains relatively unchanged. This is great news for anyone who\u2019s been battling it out on tight resale markets.<\/p>\n Aside from higher inventory, what else is good about buying new?<\/p>\n New construction homes are typically a little more expensive than pre-owned homes, and for good reason \u2013 most new construction homes are built with quality in mind, so buyers pay a little extra for energy-efficient appliances, high-quality building materials, modern finishes and home warranties.<\/p>\n It\u2019s normal to want to shy away from a more expensive purchase in a difficult market. But builders aren\u2019t oblivious to what\u2019s been happening with the market, and they\u2019re working to find ways to adapt.<\/p>\n According to Tim Sullivan, market conditions are pushing homebuilders to find a balance between marketing, quality and incentives in order to make new homes attainable for buyers who are feeling the pinch of inflation and rising costs of living.<\/p>\n \u201cWe know buyers aren\u2019t giving up on the dream of homeownership,\u201d he writes. \u201cThe interest is there, but how do we convince consumers that now is the right time to buy?\u201d<\/p>\n The answer lies in incentives.<\/p>\n In a tight market, buyers want to get the most out of their purchasing power. They\u2019re looking for two things : quality and affordability \u2013 and that\u2019s exactly what new construction offers.<\/p>\n In order to sell the homes they build, builders can offer incentives or discounts that you just won\u2019t find in a resale home \u2013 and they could save you a bit of cash in the long run. Whether it\u2019s free internet for a year, capped interest rates or a flat-out discount on the price of your home, it\u2019s worth looking into.<\/p>\n Incentives will vary by developer, so be sure to shop around and ask builders what they\u2019re willing to offer.<\/p>\n
\n2. The cost of your rent is around the same as what you\u2019d pay for a mortgage. <\/em>
\n3. You\u2019re looking for long-term stability. <\/em>
\n4. You\u2019re interested in building equity through homeownership. <\/em>
\n5. You\u2019re not afraid of commitment and are willing to dedicate time and patience into the purchasing process.<\/em><\/p>\n