I'm a first-time homebuyer I've been looking for over a year should I wait or buy now?
Super tough. You know what, I am not a forecaster, I'm not an economist.
So everything I'm going to tell you is more from a personal finance point of view
than a expert on the housing market who knows exactly what's gonna happen, point of view.
I would be biding my time. I mean, I look at what's happening in the broader economy
and nothing going on the broader economy says this is awesome for housing,
housing is gonna take off.
You know one of the biggest indicators for how healthy housing could be
and how secure people are with their mortgages is unemployment.
It's really high right now. It's going to be improving drastically as more people go back to work,
but it's not gonna go back in a snap to where we were prior to the pandemic
and I think that is not a great foundation for housing.
So if I was a young person looking for a house right now I'd be taking my sweet time
and I would not be spooked by any resumption of bidding wars
or any stories about, oh, the Toronto market's super hot again
Hamilton's hot, Vancouver's hot. I would just wait and see what happens.
It may be that there's a last gasp of speculative buying and frenzy buying
and then we're going to need to rely on the broader population again.
Immigration is down because of the pandemic, we're not recharging the buyer base like we were.
A lot of people are not going to have the same employment profile after the pandemic that they did.
They may have lost hours, they may have lost opportunities for raises.
I'm hearing now that people working at home may end up getting less pay from their employers
because they're not commuting
or they're not living in the city anymore.
So, I think there's a lot of stuff we still have to resolve
and I don't think any of it is really bullish for housing right now.
So my vote, take your time.
[Roma] How accurate is it that home prices will drop
and is there any good news for the first-time buyer?
Well, dropping prices is great news for the first-time homebuyer, I mean let's be honest.
I have no way of knowing how much prices will drop
but five to 10 percent doesn't seem out of line.
I know CMHC was predicting something along those lines, worst case.
Our mortgage rates are super low right now.
There are variable and fixed five-year rates at less than 2% right now.
It's a phenomenal time to finance the purchase of a house.
[Roma] Here's the great question, you're gonna love this.
We can afford to buy now in Toronto but with a low interest rate.
Is a fear that interest rates will skyrocket in five years valid?
You know I remember after the last recession, the big financial crisis 2008, 2009.
Rates got hammered super low and everybody, including me,
was warning rates are gonna go sky-high and you're gonna get plastered.
Rates are going to normalize and go back to where they were back,
let's say the beginning of the 2000s.
Well it never happened. Rates a couple of times tried to move higher and it never worked.
They always had to come back down low.
I think that there isn't going to be a giant rate spike anytime soon.
Possibly not even the next five or ten years.
I wouldn't be worrying about that.
But are rates gonna be as low as they are now for a long time?
I doubt that.
I hope not because higher rates would be a sign of an improving economy.
And I think that you know, five-year mortgage rates below 2%, that may not last a super long time.
One year from now we may not see that anymore.
But are you going to be paying a 4% or 5% mortgage rate in five years?
I sincerely doubt that. Maybe 3%, 4%.
[Roma] Are you a fan of variable-rate mortgages?
I think they, over the last twenty to thirty years,
have been a grand slam, home run for all you baseball fans, in terms of saving money.
And everybody sort of formed an opinion that variable rate was the way to go,
unless you were a scaredy cat, in which case you'd get five-year fixed.
And the idea was that there was always a big gap between the rate on the variable-rate
and the rate on the five-year.
In this sort of falling interest rate environment, we've been in for so long,
the variable-rate mortgage lets you participate in rate declines
and there wasn't much risk of rate increases.
We hardly saw any of those, so it was always a big win to be in the variable rate.
Right now – I'm not sure there's that big of an incentive to go with variable rate. A.
B: I don't think variable-rate mortgages could decline very much.
Unless we get an economic catastrophe, the Bank of Canada's dead set
on not lowering interest rates any further.
To me, a variable-rate mortgage has a few clicks higher to go,
potentially over the next couple of years. Not dramatic, but a little bit more.
Whereas a fixed-rate mortgage, you're locked in for five years.
If I was taking a mortgage right now I would lock it in for five years.
And you know what? I'm starting to see some interesting rates for seven and 10-year mortgages.
I think I saw a 10-year mortgage or was it a seven-year, I can't remember, but it was 2.99%
And I'm thinking 7 to 10 years,
of I don't have to think for a second about my mortgage and it's 2.99%. I'd give it some thought.
I'm not saying go for it.
I'm just saying give it some thought.
Give some thought to the peace of mind of having to not worry about your mortgage for a decade.