Young Calgarian jumps into home ownership despite challenging economic climate
There’s no denying that the current economic climate has many Albertans feeling anxious, but for 21-year-old Calgary homebuyer Brandon Jacklin, it made sense to invest and buy a new home now.
“My realtor told me it would be a good time to buy based on the market going down a bit.”
Jacklin began looking back in July 2015, and found a townhouse he loved just a month later. He has no regrets about buying during the summer months, even though prices have dropped some since then.
“I’m sure I would’ve saved money if I would’ve waited until now, but for me, I found the perfect place. Even if I lost a bit of money, that was fine for me.”
The purchase time was convenient for Jacklin, who was also pleased not to have to move in the cold winter months.
With dropping oil and gas prices here in Calgary, the housing market has seen a comparable decrease in sales as well, raising questions over the best time for first-time buyers to purchase.
According to the Calgary Real Estate Board, average housing prices dropped almost 2 per cent between December 2014 and December 2015.
Some may fear that housing prices will drop even further with the falling price of oil, similar to the crisis Calgary faced in the 1980s.
However, local real estate agent Tanya Eklund says the key difference between the 80’s oil bust and now is the low interest rates we have today.
“Our interest rates aren’t 20-22 per cent,” says Eklund, in reference to that time.
“[One bank] just hiked up rates slightly, but the other banks have yet to follow suit,” she explains.
Brian Betz works for Money Mentors, an agency committed to helping Albertans improve their financial situation; anyone is welcome to come to Money Mentors for a free consultation.
Betz says there could be a number of reasons why people might consider buying a home in this economy. But while he agrees that interest rates are low, he says homebuyers should also consider future rates.
“Right now, rates are probably as low as they will ever get, and if I lock into a five year term, and I go to renew in five years and the rates are higher, am I going to be able to afford it at that point in time?”
“There are so many factors that fit into the situation. Lifestyle: are you a couple? Are you going to have children? Do you need more room?”
“Your circumstances in terms of your employment stability have to be factored into this whole thing,” adds Betz.
According to Betz, because so many prospective young homebuyers have seen the housing investments of their parents or others appreciate significantly in the past few decades, they tend to believe that their investments will do the same. However, in this current market, that may not to be the case.
“Everybody assumes that will continue forever, but at some point in time, as the baby boomers continue to age, really those gains are not going to be there like they were in the past.
“You have to have a realistic view of why you want to buy a house. If you’re buying it as an investment, so to speak, that’s probably the wrong reason, because houses are not going to go up forever,” Betz says.
Jacklin wasn’t intimidated by purchasing his home, and feels more secure owning a home instead of renting.
“I think especially in the market we’re in now,” says Jacklin, “it’s important to realize that in the long term, by buying a house, it’s your home. It’s not just the market value, and you only lose money if you sell in a downward market.”
Eklund says that she believes with certainty that the market will continue to decline this year, but waiting to buy poses some potential risk to your investment.
“If interest rates go up, and you have to lock in for five years, you’re paying a lot more on your monthly payment, so you’d probably be better purchasing now. Even if we see 2-3 per cent more decline in the average sale price, it’s probably going to be less than what you would see in a higher interest rate on a monthly basis.”
Statistically, more inventory is available in the spring, says Eklund, and therefore the upcoming months offer the best variety for buyers. According to Eklund, the next six months will be prime time for purchasing.
Betz, on the other hand, though he also believes that housing prices will continue to drop over the next year, disagrees with the idea that people should act right away.
“Do I think that house prices have stabilized? No, I do not. I think that they will continue [to drop], as now people are in a more difficult financial position. I think that there may be some better bargains to be had over the next year,” says Betz. “For that reason, I would be holding off on buying a home.”
“No one can predict the bottom,” says Eklund of the current market. “I think a lot of buyers, especially [those who work] in the oil and gas industry, when they hear how bad it is, they are waiting, waiting, waiting… I’ve had some buyers in the past wait for the bottom and they miss it.”
Regardless, Eklund stresses that, whatever your choice as a homebuyer in this market, the most important thing is that you feel comfortable with your financial decisions at the end of the day.
“I think that it’s important to pay what you feel is a reasonable price, and also find the right home.”
Thumbnail by Caroline Fyvie.
The editor responsible for this article is Michaela Ritchie, firstname.lastname@example.org