Get to the Point – June 2022

Thank you for taking a listen to Propel’s Get to the Point audio. Yes, I’m a licensed Realtor, and yes, our team is in the business of helping clients buy and sell homes. So it may surprise you to hear the following statements from me to all the real estate purchasers out there. Please remember your primary residence is not an investment. You heard me correctly.

When purchasing real estate as your primary residence, you’re buying just that, a roof over your head. You see, until there’s some monumental shift in the structure of our society as a whole, housing is a basic need we all need to pay for. We pay for housing to protect us from elements, to keep us safe, to provide privacy, a place to lay our heads at night. This is why even in the midst of rising interest rates and balancing of prices, folks are still purchasing real estate. Even though rising rates and the talk of recession have cooled the real estate market, affordability has not increased.

That’s because price declines for a majority agree to Vancouver have not kept pace with the increasing interest rates. Therefore, your monthly payments are actually now more than what they would have been at the peak of the market earlier this year. For a better understanding of this concept, have a look at our July Market Insight video. There I show how a 25% decline in home prices is needed for your monthly mortgage payment to simply be the same had you bought at the peak of the market with a lower interest rate. And prices have to drop 50% for savings of $1,000 in your monthly mortgage payments. Anyway,
with that being said, if affordability has not increased, why are people still making purchases?

Well, because of the very simple fact that everyone has to live somewhere. And for the first time in a few years, buyers have more time, more options, and more negotiating power. So if you qualify for a mortgage and you can afford the monthly payments, why wouldn’t you buy? Yes, prices may continue to decline, but are you trying to time the market, waiting for that exact moment when prices bottom out?

Or are you trying to purchase a home for you and your family? It’s also important to keep in mind that the price of your home only matters at two points in time when you buy your home and when you sell it. Everything else in between is an unrealized loss or gain. And historically speaking, if you live in your primary residence long enough, you’re bound to realize a healthy gain when you end up selling it. Even for our clients who are empty nesters that are downsizing, this gain does not qualify their primary residence as an investment because the vast majority use a portion of the gain to help their children make their home purchases.

This is why I’m always perplexed when buyers in a soft real estate market state they are waiting for the prices to bottom out before purchasing, treating the roof over their head like a commodity. Even if you disregard everything I’ve said and stick to that approach when purchasing your home, you’ll only know prices have bottomed out when the trend is reflected in statistics that all other home buyers and more importantly, home sellers have access to. That means you run the risk of any or of the following taking place a reduction of choice, time, negotiating power, or even an increase to prices. So, what’s the point? Treating the purchase of your primary residence as an investment is not a sound strategy.

You’re better off sticking to the basics. Purchasing a home that meets the needs of your family and is one that you can afford. Although the current market may not increase your affordability, it does increase your options, provide you with reasonable time to make a sound decision, and even the opportunity to negotiate terms and conditions. Remember, the uncertainty that causes fear and volatile market conditions also fuels your negotiating power as a buyer. Why not take advantage of it? 2458 other purchasers across greater Vancouver did in the month of June alone.