Are those storm clouds in the crystal ball? Now that I have set the tone for my predictions in 2018, here we go.
- First Time Home Buyer Price range to offer reduced selection of homes in your price range and increased competition
With the mortgage rule changes impacting first time home buyers in the fall of 2016, home buyers with 20% down payment could now be impacted by the same forces (government legislated mortgage qualification rules). If you haven’t heard about these, the net effect could be more people staying in their existing home because they won’t qualify for a larger priced home. This means that you could see less homes for sale in the range of $200,000 to $400,000 and increased competition for these homes.
2. Mortgage rates slightly higher in 2018
2017 saw an increase in mortgage rates by 1/2% on both fixed and variable mortgage rates. This trend is expected to continue based on the low unemployment numbers and a Canadian economy which is performing well. The only things holding back steady rate increases is the lack of inflation rate above 2% and potential NAFTA cancellation by the US. The government is closing watching the housing market and trying to cool price increases especially in markets like Toronto and Vancouver where the prices have been robust.
Higher rates will affect first time home buyer decisions on how much mortgage payment they feel comfortable with. An additional 1% of interest on a $200,000 mortgage is over $100 more per month mortgage payment. First time home buyers generally know what they are comfortable with for mortgage payments and this will have an effect on their purchasing decision.
3. Manitoba Condominium Act will have an impact on condo purchases
Condominium corporations have until Feb 1, 2018 to have a reserve fund study completed. Many have these reserve fund studies completed and first time buyers are really impacted by the variations in condo fees due to these reserve fund studies. The new condo with lower fees can be really enticing when compared to an existing condo with higher condo fees. The reserve fund study is intended to anticipate major capital costs in the future relating to maintenance and repair of condo complexes.
As I mentioned in last years predictions, first time home buyers must have a long term outlook when owning a condo. If they decide to get married or start a family, they may be forced to keep their condo or lose money on the sale as some of the condo values have not been increasing. This is largely due the simple fact of supply and demand. There are a lot of condos for sale on the market and there are new construction projects coming for the next several years bringing many more units to the housing supply in Winnipeg.
4. Everything in arranging a mortgage is more complicated.
Now is not the time to take the advice of only one person at your bank or credit union. The changing landscape of mortgage rule changes over the last 5 years and the guidance required in navigating the mortgage and real estate market is even more important. The importance of having a real estate agent on your side that is working with the mortgage broker is very important to ensure you are getting the best advice possible from all parties working together.
In summary, if you are a first time home buyer here a couple of my key points on why you need to act now:
- Interest rates are still great by historical standards
- Prices will keep increasing in the $200-400,000 price range due to the increased demand from mortgage rule changes
- Obstacles to home ownership can be overcome. Purchase with improvements, RRSP’s for down payment, pre approval advice from mortgage brokers, and the varied lender choices all assist first time home buyers. Don’t just shop with your bank or credit union, there are plenty of options for you that you may not even know about.
- Don’t wait to save more for a down payment. Getting into the market now is a way of forced savings when your mortgage payment in building equity in your home.
-Daryl Harris, AMP is a First Time Home Buyer Specialist in the Winnipeg market providing advice and strategies to this segment of the market for over 10 years.