Five tips to buy in a hot real estate market

BY CLEVE DeSOUZA

Home prices are rising even as sales set all-time records.

According to Toronto Real Estate Board (TREB), the average price for properties in Toronto for January 2021 was up by 15.5%. That’s an increase of $967,885 over just a year ago.

The growth comes primarily from low-rise housing segments. The average price for a condominium was down in Toronto, but TREB expects the condo market to pick up this year.

We are still in a red-hot seller’s market and many buyers are finding it harder to land that dream home. This article provides some tips for how to buy in this hot market.

Tip #1: Buy properties during fall and winter
If you’ve thought about investing in a home, get ready. Traditionally, house prices are higher in the spring and summer. The weather is comfortable, which makes shopping easier. Homes look their best. Plus, people like to move in the summer.

There are fewer weather-related difficulties and it gives the kids a chance to settle in before school starts.

Real estate price trends show that prices are lower in the fall and winter. So, the best thing is to bundle up and buy when fewer people are shopping.

Tip #2: Take advantage of low rates while they last
This year, there may be added incentives to buy in the spring and summer. Mortgage rates dropped last March when the Bank of Canada kept rates at historic lows to support the economy during the pandemic.

It wasn’t long ago that rates were in the 7% range, but some are now as low as 1.4%. This puts upward pressure on housing prices, forcing the government to temper the rates to support the economy as we emerge from the pandemic.

The low rates won’t last forever, though.

Tip #3: Get your mortgage pre-approved
Pre-approval helps you shop with confidence in a hot market. Finding a qualified mortgage agent allows you to evaluate your situation and pre-shops the lending market to get you pre-approved.

Note that pre-approval is not an approved mortgage. It does provide a high level of confidence that you will be approved. It also gives you and your real estate agent more certainty on how much you can afford. It also makes it faster to complete your mortgage paperwork.

Tip #4: Stay calm and make smart buying decisions
Prices in Toronto have skyrocketed and many people believe their dreams of ownership have vanished. That’s not true. The trick is to maintain a resilient mind-set and create a strategy.

You will have to make decisions about where you live and what you can afford. When we talk to clients, we look at the cost benefits of alternate locations. We remind you to consider your commute to work and school, proximity to family and friends, as well as the likelihood of your investment growing in value.

In a hot market, you need an agent to help you through bidding wars, know when interest rates will rise, predict when the market will crash, and guide you to the right property.

Tip #5: Never forget the power of leverage in real estate
You can own properties by coming up with a fraction of the overall value of the property and the bank will lend you the rest. It’s called leverage. It works like this. When you buy a home, you give the bank a deposit.

The bank finances the rest of the purchase price. If you buy a $500,000 home and it grows in value by $25,000 a year, you can sell it, pay back the bank, and pocket the profit. Congratulations! You just leveraged the bank’s money to invest in your future.

I strongly recommend you get professional help when employing advanced strategies such as leverage.