So here we are. Everyone is an expert in predicting what real estate will do in the next year. Me included.
Why not? My predictions are as good as any of the experts out there. Does any one rem,ember what they were telling us just a year and a half ago? Predicting doom and gloom, just like in the USA. Prices will collapse and you will be able to buy a home in Vancouver for half the price.
I said it would not happen and if you are interested I can tell you why. But that is not what this blog is about. By the way all those experts actually got paid for all those doom and gloom predictions. I didn't.
So assuming that we, just like the weatherman who has a lot more scientific meteorological help in predicting the weather, really don't know what is ahead. And the weatherman only predicts a few days ahead.
But here is what I know for sure. The numbers. Ahh , the numbers. You can make anything work with numbers.
Anyway. let's assume that you decide to buy this TH in Burnaby listed for $289,000. Yo got 5% down payment, and that will leave you a mortgage of $274,550. At 3.99% interest rate on a 5 year term and 25 year amortization, O.A.C., (and I heard of lower rates), your monthly payment would be $1442.
But, listening to all those experts, you say to yourself, I will wait for the prices to come down. So you wait and sure enough, the prices are down 10% in a year from now and you decide it's the right time to buy.
Wait!. While you were waiting for the prices to come down, the mortgage rates went up 1% to 4.99% (same terms as above) Your calculation on a lower selling price shows that your mortgage will only be $260,100 and your payment $1435 p.m. Not much difference in payments, but you saved $25,900 off the price. Sounds pretty good, right?
Well, lets just look at the details. At 3.99% over 5 years you would have paid $35,585 towards the principal, and at 4.99% you would have paid $28,431.
Applying these two amounts to the two different mortgages, it would still leave you with a lower balance even if you paid 4.99% interest, by $7276 after 5 years.
So you are still better off by waiting, right? WRONG!
Unless you were staying in your parents basement, you were probably renting. A one bedroom apartment would have cost you, conservatively, $750 p.m., x 12 = $9000. You saved $7276 but paid someone else $9000 for rent. You actually LOST money. $1724! You could have taken your sweetheart for a nice holiday and have some shopping money left.
Not a great deal. This calculation does not include some incidental expenses, but it was designed to illustrate that low interest rates are more important that a price of the property.
Unless you are investor/flipper, and you have gobs of money burning a hole in your sock, this is not for you. You can wait and pick your time.
But for the rest of us mortals, the message is, if you are ready to buy, do it now. It won't get much better than this.
If you are looking to Buy or to Sell real estate in Vancouver area, give me a call. My consultations are FREE. The benefits to You, may be worth a lot of money. Call Jeff Stark at 604-290-7890 or email me at jeff@jeffreystark.net
