FACTORS DEFINING AFFORDABILITY
Hello there my friends in CAWEE:
It seems we made it through the holiday season, and all the extra festivities are finally out of the way. Some of us were just waiting for this time, as we have been thinking about a selling and/or buying a home – is that you? I figure for you guys, some information on the real estate market would go over real well right about now.
That is exactly why I visited the Toronto Real Estate Board recently. Jason Mercer, the senior Market Analyst for TREB, gave a great presentation. He talked about what to expect in the real estate market in 2010, and how it is different from what happened in 2009. I am the humble messenger, bringing you the results of all his research.
When you think of buying a home, what is the first thing you think about? Can I afford to buy at that price? However, if you look only at price, you may end up missing out on an opportunity. There are other pieces to the affordability puzzle, such as:
Ø The interest rate on your mortgage
Ø Your income
Add to these components the cost of utilities and property tax, and the picture of affordability is fairly complete.
AVERAGE HOME PRICE
Yes, the average price of a home will rise on 2010. However, Real Estate more often than not goes up in value, so no big surprise there. The good news is that prices will rise only by around 7% - much less steeply than we saw in 2009.
COST OF BORROWING
When buying a home, most of us have to borrow some money from the bank. That is because we do not have $400,000 cash lying around. Am I right? And obviously, with borrowed funds comes interest. If the interest rate is high, there will be less money left over after you have paid your housing costs. If the rates are low, there will be more money left over after you have paid your housing costs. And, if there will be more money left over after your mortgage payments, banks will more likely decide, “OK, let’s give this one a mortgage.” Good news folks – right now interest rates are the lowest we have had in some 50 years! They are under 4% right now; in the eighties, they hit 18% and more!!! OUCH!
AVERAGE HOUSEHOLD INCOME
And finally, how much you earn is a big factor also. Banks look at that to see how much house you can afford, by comparing your housing payments to all the other stuff you have to pay for.
So, what does this mean for those looking of us to buy a home? In very general terms, the affordability of home ownership in the GTA in 2010 will remain good. Why? In conclusion, here are some reasons:
Ø Home prices, though rising, will rise in a very gradual way
Ø Interest rates, though increasing, are still excellent. In fact, they are as low as they have been in some 50 years.
Furthermore, when you hire me to represent you in a real estate transaction, I promise to steer you towards a home you can afford today, and in five years when interest rates have risen.
It would be my pleasure
to be your guide and advocate for this,
the largest transaction many of us ever make in our lifetime.
With warmest regards,
Right at Home Realty Inc