First time home buyer in Canada? It is a good time to buy?

Is it a good time to be a first time home buyer in Canada? Well, let’s see. I analyzed some data and added some of my own perspectives to help you decide if this is actually the time.

These are uncertain times; nobody has successfully predicted the coronavirus’s impact on the real estate market so far.

When the covid19 started, all the media was all about the imminent crash in the real estate market. Panic was everywhere. Investors started selling rental properties, and you could find good deals on the market anywhere.

But it was all about that, just panic based on predictions that no one got right. Despite all odds, the real estate market stud strong and continue to grow. 

It was certainly a surprise to see how the GTA’s house prices continue to rise despite records of high unemployment and the economy lockdown. Just take a look at this graph; they keep rising!! Compared to last year, they went significantly up. (Image provided by

A graph to represent the behavior of the real estate market in Toronto.
Toronto housing price 2019-2020

Real estate specialists have always monitored the unemployment rate to predict real estate market performances. According to Statistics Canada, the unemployment rate fell 0.7 percentage points to 10.2% in August. As a result of the COVID-19 economic shutdown, the unemployment rate had more than doubled from 5.6% in February to a record high of 13.7% in May.

Below you can see how unemployment rates have Behaved historically.

Data of the historical unemployment rates in Canada since 1970 to 2020. It can help foretell the future of the real estate market in Canada
Unemployment rates since 1970 Canada

Interest rates

Presumably, what is keeping the market moving are the historically low-interest rates.

The cost of borrowing money is so low today that it is like borrowing from a family. I have a variable rate mortgage, and I am paying 1.45 percent!

The following graph shows how mortgage rates have behaved historically.

Graph that represent the change in interest rates over time.
Interests rates behavior since 1990

They will go up eventually but today you can lock you down in a fixed mortgage for 5 years and forget about the fluctuations on interest rate for the next five years.

Understanding the current situation will help you become a successful first time home buyer in Canada. Let’s keep arming you with knowledge.

New houses being built

 Another indicator to take into consideration is the builder’s activities. According to Canada Mortgage and Housing Corporation (CMHC), housing starts in Canada rose to 262,396 units in August 2020. That’s a 6.9% increase in inventory of newly built houses compared to the previous month, being the highest increase in new buildings since 2007.

Data of the new start houses in Canada since 2019. A measurement to help decide first time home buyer in Canada whether is a good time
New residential units in Canada

Although substantial building activity indicates a robust real estate market, overbuilding can cause depreciation by adding more inventory than demand.

This trend is evident in Barrie; you can see a new construction zone everywhere. This was not like this 2years ago. Even the Mayor mentioned in an interview how many requests for new buildings he gets every day.

This is an option you can contemplate as well. Rather than buying your first-time home a resale, you can buy a new one. Check on that option. My second house was newly built.

Real estate cycles

Now, one of the essential pieces of the real estate puzzle is timing. If you buy on the wrong side of the cycle, it can take years for you to see today’s prices again.

A cycle is a series of events that repeat in time following the same order. This concept of cyclical trends is a widespread basis for explaining, analyzing, and forecasting real estate trends in Canada and any other country influenced by the same capitalist market laws.

Cycles are like this:

real estate cycles to give a clearer idea of how the cycles work. This can help decide first time home buyer in Canada if it is a good time to buy.
Real estate cycles

Prosperity is a time where employment is abundant. The consumers have high confidence, and as a result, there is an intense market activity.

Contrary, during the Recession, the unemployment rates are highest, contributing to waning consumer confidence and no real growth.

Recovery follows a recession when the economy starts to correct and improve.

The length of these cycles varies, and no cycles have ever been the same. Other factors come to play like government intervention, demographics, etc.

I don’t pretend to simplify this complicated subject, but it is an excellent base to take as a reference to see if it is a good time to be a first time home buyer in Canada.

The recession bottom is the ideal time to buy. However, how do you know where you are at a bottom or a peak?

What market are you in? Is it a sellers’, buyers’, or balanced?

The next thing to consider is you market a Sellers or a Buyers marker? This will give you an extra tool to determine the answer; is it good to buy a house for first-timer?

Sellers’ Market

In a sellers’ market, the inventory supply is low. In contrast, there are significantly more buyers, benefiting the house seller the most, who is more likely to sell at over asking price due to a bidding war to win the house.

You will notice if you are in a seller’s market. It’s undeniable

Besides, your agent should know what market is currently in your area. I would run away from a situation like this!!.

If you are in an over-heated market, wait until things cool down; otherwise, you will end up over paying.

I experienced this first hand with a co-worker of mine. He jumped into a sellers’ market and bought super high. He never wanted to tell me how much he ended up paying, but he said higher every number I swan to him. I think he was embarrassed; after all, I don’t know.

Just a couple of months after, the market cooled down, and prices went down.

He is ok now, three years after, but there is not much equity in his home if he decides to sell, only the one that he has built, paying down the mortgage and a modest appreciation over time.

This kind of mistake can be avoided even if you are a first-time homebuyer.

Buyer’s Market

On the other hand, during a buyer’s market, there is lots of inventory; this is favourable for buyers.

You can negotiate better terms and betters prices. There are more options to choose from. In general, you can get better deals and find the perfect place.  A buyers’ market would be the ideal moment to buy.

Balanced Market

During a balanced market, there is an equal number of buyers as sellers, making it favourable for the 2 parties. This is a win-win situation.

Should I buy base on the market performance? Is it up or down?

It doesn’t matter whether the market is up or down; no one knows for sure when its max peak will be or it’s bottom.

However, what matters is you can afford your payments. You could also buy a property where you could rent the basement, which can help you amortize the risks.

I won’t buy a house, never again where I have to pay in full for the mortgage.

What I did to make a firm decision was this: I knew I  needed a place to live anyway. So I compared how much the rent was in my market and how accessible they were then. It wasn’t easy to find rentals, and when I compared rental vs. homeownership, it made more sense to buy even giving only the 5 percent down payment.

For me, it all ends up with numbers. They are the ones that can make you make the best decision because markets will fluctuate according to their natural laws.

And it worked. You will see, 4 years ago, I was exactly in the same place you are in today, wondering if buying a house would be a good idea given the real estate market’s hectic behavior and the crazy prices that didn’t seem to cool down.

Fast-forward to today, the first property I bought has double in price, and I bought a second house to leave my first home as an income-producing property.

In addition to that, my second house has also appreciated it in value in just 2 years. I grow my equity from my primary resident to over $300k. And it all started with a 15k down payment, Crazy, right?

To summarize

At the moment of my writing September 2020, Sound challenging to be a first time home buyer in Canada.

Unemployment rates are high which is an indicator of growth slow is down.

Interest rates are super low; in fact, they are at its lowest, which is fuelling the increase in price and the market activity.

There is an increase in new building houses that is setting records high as well which can lead to value depreciation due to introducing an excess of inventory over demand.

Indeed these are unprecedented times of records breaking and uncurtaining.

Everything seems like the end of the world but it is not. I can’t tell you to buy or not, but what I can tell you is that buying my first house was the best financial decision I have ever made. It was a huge decision and I was full of doubts and concerns but I am seeing the results today. Check how I turned my house into a rental unit.

My advice to you is to gather as much information as you can about the market you will buy-in. Find a good local realtor and do not rely completely on what they say, they are helpful but sometimes they make mistakes, or they are not as informed as you might expect them to be. Get involved in the process.

turn off all the external noises and make the decision that is right for you based on your own personal circumstances.

Don’t be scare; I know how it feels. You will be ok.

What cycle do you think we are in?

Yours for Growth

You are in Real Estate Investing

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