We are into the new stress test, and the real estate world is still chugging along. I know the stress test has been on a lot of people's minds because we have been working until midnight the last week getting all of our approvals and pre-approvals in before the change. Realistically, this change makes a difference of about 4-6% of your purchasing power, depending on a number of factors. The thing that most people don't want to talk about is that the market itself has gone up across Ontario between 20-40% over the last 12 months. For those people who we have pre-approved and have been looking for their 1st home - this has been toughest on you. Both of these factors affect you more than those who already are living in a home. This real estate market is similar to rising tides in the ocean. If you are standing in the water, a large increase in tides can overwhelm you. If you are in a boat, whether the tides are going up and down you can ride them out.
There are news articles where people are saying that that the market may correct across Canada by as much as 20%. Firstly this is not my belief; the supply for both rental units and single family homes are so low that until we increase the amount of homes built I believe that this price problem will continue. For a moment, let's assume that the 20% drop in housing prices is true. In Waterloo, where I am writing from, housing prices have increased by 34.3% increase from April 2020 to April 2021, according to KW Association of Realtors. This means if housing drops the full expected 20%, people who bought in April of last year would still be up over 10% from their purchase price last year. Now you can see why these changes affect those who are not yet in the market the most. On top of this, rents are increasing at a rate just as fast, if not faster than housing prices, so saving larger down payments has become very difficult. This also means that most home owners are actually paying less than what they were previously paying in rent after purchasing a home, even with the added expenses that come with home ownership.
Now I know you are saying "Jeff, this is more depressing for those of us who are not yet in the market, are you going to provide me with a solution? My solution is to find a way to get into the market. This may mean for some to purchase a condo where a semi or detached home is what they would have wanted, or purchasing a 1-car garage instead of 2 for the time being. Settling for something smaller in the short term is okay, as long as you have a solid plan moving forward to get to your goal. I am by no means suggesting that you jump into a property that will leave you in a bad spot. All I am saying is if you are hoping for a “yacht” and need to settle for something smaller- that is okay. Getting proper advice on how to reach your goals is important and we will set up a strategy to get the larger "boat" even if it takes a couple of years to get there.