Toronto’s real estate market has shifted since the spring of 2022. In the time that has passed, the Bank Of Canada (BoC) has impacted variable interest rates. The lending rates have gone up, which has affected people’s affordability. Add into the equation that the equity stock markets have taken a hit. Some buyers have become hesitant to purchase a home. But that isn’t the whole story.
80% of homeowners have a fixed-rate mortgage, and these rates have been stable. What does this mean for the average Canadian? The average homeowner in Canada is less impacted by the BoC’s overnight lending rate – they feel more secure than the media would have you believe – their mortgage costs remain the same as what they negotiated for in the first place.
Many would-be buyers with a home or condo in Toronto are debating whether they should buy or sell first. It’s not a black-and-white answer. We provide some elements you must consider before proceeding with the sale and purchase.
We want you to remember: Do not try to time the market. Always try to transact within the same market – this makes it easier to reap the rewards with the right real estate investment. If you wait before buying again, you may be buying at a comparatively higher price point as the market picks up (yes, the Toronto real estate market will rebound in the next year or two!) There are far too many buyers and new Torontonians for Toronto’s real estate prices to stay repressed. We have seen this before, and we will see this again.
Toronto’s real estate market is in a correction, and there are certain tips that go a long way when choosing to buy first or sell first. Let’s get started!
When To Buy First
Housing Supply Consideration
Let’s act under the assumption that you love where you live and you do not have a need to move immediately (i.e. a baby on the way.) There are more houses on the market than there are buyers now, thus a “buyers” real estate market in Toronto. This means that you will have options to choose from. You don’t have to purchase the first house you see and compete with ten other buyers. You will (in all likelihood) be able to buy through a negotiation. The benefit to you, the buyer, is that you have a choice. You can wait for the “right” house to come to market. The key is to have a game plan to sell your current residence promptly to close your purchase.
Home Budget Considerations
Continuing with the example above. The “crux” of this scenario is that you must be very clear about your budget. This typically means that the buyer who owns a condo or house in Toronto needs to have enough equity in their current home to sell for less than expected – to have enough downpayment to complete the purchase. Another way of putting this is that the buyer needs to have some downside protection for selling their current residence in the form of money/capital to bridge any shortfall. We will get into selling before buying in the next section (just in case this is too much risk for the buyer in a downward-trending real estate marketplace.)
Stress Level Check
This is key; you must first discuss the pros and cons of buying versus selling. Our job is to help clients walk through the decision’s full scope (not just the narrow approach detailed above). There are pros and cons to every decision. There are also timing elements and other details that we go through with clients on a case-by-case scenario. Knowing and understanding your stress levels is critical. On you know best for you and your family. We are here to guide and give you real-life scenarios so that you can read and react ahead of time. Buying and selling can be stressful. There are rare occasions that it is less stressful; typically, buyers and sellers have no mortgage obligations and deep pockets outside their home’s value. Another critical element is discussing financing options with a mortgage professional so that you can protect your downside should the need arise.
➤ Every good investment needs a well-planned strategy. Start preparing with the following:
- How To Adjust Your Home Selling Strategy When Prices Are Falling
- 2022 Is The Year For Buyers To Buy in Toronto
- How To Choose A Real Estate Agent
- The Importance Of A Home Evaluation
- 5 Tips For Selling Your Condo
When To Sell First
Housing Selection
Now we jump to the flip side of the coin; for some, it’s best to sell first (with a longer closing.) In this case, the seller feels confident in the homes currently on the market in their price range. They believe that they won’t have an issue securing the right home. The crux of this decision is typically based on the funds available to the buyer. To have crystal clarity, they wish to sell first, knowing exactly how much money they must put towards their next home.
Home Budget Considerations
As we discussed above, the budget is clearer when the buyer sells their home first. This gives complete confidence that they know how much money they have in their pockets to then go out and purchase their dream home. Add these funds to the discussion with their mortgage specialist, and they will have the confidence to go out and buy what they wish.
Stress Level Check
In this case, the stress level check is “will we be homeless?” Sellers who would-be buyers may get anxious about the potential of not having a home for a period of time. This possibility could occur when their current house has closed (the funds are in their bank) and they have not found a house they like or have not yet closed on it (i.e. the house is closing in 60 days.) In this case, it’s worth looking into short-term rentals and asking friends and family if they can stay for a period of time. Some clients even choose to go travelling for a portion of this period. Either way, we will discuss the options. We discuss Plan B, C, and D. There is always a great solution. The confidence (i.e. the forest for the trees) is that you have money in your pocket for your purchase.
Key Takeaway:
The above scenarios are fine, but this is not an exhaustive list. We discuss each option with our clients (too many to go through in a blog post!) We want people to understand that timing the market is 100% impossible. You never know if you are at the bottom, the middle, the peak or somewhere else. Waiting too to buy back in can be costly. Try to buy in and out of the same marketplace, especially when it’s your principal residence (where you and your family live.) Don’t hesitate during this time. How do you ensure that you won’t hesitate? Hire a great real estate agent. We give clarity in a time of uncertainty. We have been fortunate enough to see a lot in real estate over the last 20 years. We can guide you to a successful decision. Clients only learn the value of a great realtor in a time of challenge. That’s what we get paid for.
