Why Now May Be a Good Time to Cash in on Your Home’s Equity and Rent
This is a question that many people are asking themselves these days: "should I rent or should I buy?" The answer may be different for everyone, but some recent trends in the housing market may mean it's time to cash in and rent.
House prices in Canada’s eleven major cities rose by 9.36% during 2020 (8.33% when adjusted for inflation), the highest growth since 2016, based on figures from Teranet – National Bank of Canada. This is the 12th straight year of house price growth, following y-o-y rises of 1.95% in 2019, 2.51% in 2018, 8.92% in 2017, and 12.25% in 2016. And while this increase can be attributed to inflation rates, other factors play into this, such as low mortgage interest rates (3.8% at the moment) and tight inventory levels, making it difficult for buyers to find homes.
If you're getting ready to sell your house, now might be the time to sell and rent until home sale prices stabilize once more.
The housing market is in flux.
The housing market is dependent on the supply and demand of available homes. Right now, we are in a period where more demand than usual has created an upward trend in home list prices. This has placed many homeowners at a crossroads; should they cash in on this once-in-a-lifetime market or hold. If that is the case, what options do they have if the supply of homes is still much lower than the current demand?
It might take some time to find the home you are looking for, but you may have the opportunity to find a rental with the option to purchase during the time being. If this does not become an option for you, be patient. Rent for a year until you either find your dream home or talk to the landlord about purchasing.
There has been growth for townhome builds as the housing demand shifts to more suburban and exurban areas. This creates an affordable homeownership option for many first-time buyers. Talk to your real estate agent to see if this option is available in your area.
Another option is to rent and keep your eyes open for "for sale by owner" signs in your desired neighborhood, then call your agent right away. These sellers may not want to use an agent to list their home, but they may not have a problem working with a buyer who an agent represents.
Don’t commit yourself if you’re unsure
Renting is an option that many people have been considering recently, especially if they are not sure about their long-term goals. It's a good idea to think ahead before committing yourself to one option forever...and renting may be just what you need for now until the housing market returns to “normal.”
Timing is important in the housing market. It can save, or cause, a lot of headaches. If you are relocating temporarily and are unsure if you see yourself staying in the area, renting is the better option. Buying a home is a big commitment and a lengthy process that should not be rushed. It should receive your full attention and time.
We want to make sure you avoid home buyer’s remorse if at all possible during this crazy time. Check out our recent blog covering the ways to avoid this kind of regret.
Worried About Home Buyer’s Remorse? These 5 Tips Will Help Avoid Regret
Picture this... You won the bidding war! But did you get caught up in the moment, and now you have regrets? See how you can avoid buyer’s remorse before bidding gets heated.
Renting might actually be the cheaper option
The average household spends about 30% of their income on housing, and renting may be cheaper than purchasing a home right now for previous homeowners. While this isn't always the case, the high cost of home purchases at the moment creates rental favor.
Toronto has seen average rents decline in every month in 2020, as well as January and February of 2021. The average rent for an apartment or condo in Toronto is now $1,987 down from $2,454 in March 2020, which marks a decrease of $467 or almost 20%. This is good news for movers who can't find a place to buy. The other good news for movers is that vacancy rates have increased to 8.8% in Q1-2021 from a revised 7.3% in Q4-2020 and 1.1% in Q1-2020.
For individuals who are afraid of “overpaying” for the current home inventory, short or long-term rentals could be the solution in the meantime. You may end up saving more money in the long run if you sell your current home for top dollar during this high market demand and wait to repurchase your next home with the proceeds of your sale.
Enjoy the freedom of renting
There are many benefits of renting that homeowners don't get to experience, such as moving freely and living anywhere they want.
We hear it all the time “location is everything," and the beauty of not settling down, and creating more permanent roots, is the freedom to explore your options. Renting allows you to live in different neighborhoods and search for the perfect location before deciding whether to buy again. Are there a few areas of town or even different cities you have thought of finding permanent residence in? If you have the type of life that allows you to move every few months or every year, you can open yourself up to a world of possibilities.
You may just find that your once ideal area of town isn’t what you thought it would be. If you take advantage of exploring short-term living, you may just know the perfect spot when you decide to purchase your next home.
With inventory low and prices climbing, it is a great time to sell if you are considering downsizing or relocating in the near future. Some key considerations for timing include budgeting for commissions and closing costs and finding an agent that can help with these expenses.
Those who have rented previously but don't want to do so again because they would rather own their property outright could also be a good opportunity to buy into today's market while interest rates remain relatively stable.