While rising house prices in some centres across Canada are driving homebuyers to make emotional decisions and max out their house hunting budgets. Some taking this plunge because of the fear of missing out, whether it is the right time to buy a house or not. A new survey shows that some Canadians are approaching their house hunt from another point of view: concern and hesitation.
Although many Canadians indicated that owning a home is a goal, they feel that right now is not the right time.
According a Manulife survey:
- Eighty per cent of respondents say that owning a home is a goal, but only 25 per cent of current renters plan to buy in the next 12 months
- Twenty-three per cent feel that the right now is not the right time to buy a house
- The reasons for this homebuyer reluctance vary; 72 per cent blame says affordability, 32 per cent feel like the market is too volatile and 20 per cent feel that their own personal financial situations are not ideal to buy a home.
“The fact that such a large group of Canadians are pressing the pause button before they jump into the housing market is encouraging, because buying a home is a huge financial responsibility,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“It can be a great investment, but it can also be a debt disaster if you don’t have all your ducks in a row, or if you make emotional decisions. If you’ve got lots of debt and little savings, even a slight change in interest rates or market conditions can make you vulnerable. Better to wait until you are on more stable financial footing,” says Schwartz.
Is now the time for you to buy a house? Here are some things to consider.
Hurry up and wait?
There are a few signs that you should put your goal of homeownership on hold. If you have little savings accumulated, are new on your job or otherwise lack job stability, or are carrying high loads of consumer debt, you would be well advised to engage in some longer term planning.
It’s worth it to take a step back and grow the gap between your debt and your savings. You’ll need savings not only for your down payment, but to have an emergency fund on hand as a homeowner.
That’s not to say that homeownership isn’t in your future. It maybe just means that today isn’t the day.
Watch interest rates
Of those that indicated that right now is the right time to buy a house, 35 per cent said that the reason why was that interest rates were low. The problem is that low interest rates can often mean that people are able to borrow more money, which is almost a necessary evil to gain access into the housing market in some cities in the country. However, that is a slippery slope.
Interest rates are one variable that you can’t control. However, you can control the amount of mortgage that you take out.
Set your housing budget assuming a rise in interest rates. How would you fare in terms of the rest of your household expenses? Interest rates will rise at some point and you need to be ready to weather that financial change.
Include all costs
Don’t forget the numerous other costs associated with home ownership. There are closing costs when you purchase, but there are additional costs that come into play, like ongoing maintenance, deposits, and greater insurance. When you are setting your budget, include those- at least on a quarterly basis.
Before you buy a house, you’ve got to get your own financial house in order. You can start by getting a handle on your debts. Call one of our trained credit counsellors at 1-888-294-3130 or visit our free online debt analysis.