THUNDER BAY — Buying a house is often the largest purchase someone will make in their lifetime, making it important to not only get the right bang for the buck, but also making sure there are enough bucks to maintain the huge investment after the closing date.
According to the Canadian Real Estate Association (CREA), there was a 30 per cent decline in the number of homes sold in April 2022 compared to the same timeframe the previous year. The average price of a home in Thunder Bay also saw a decrease of 5.7 per cent averaging out to approximately $345,000 for a single detached home.
Thunder Bay Real Estate Board president Wes Case said it is very much a seller's market right now, meaning that there's not enough inventory for the number of people looking to buy homes.
Case said interest rates were up and above eight per cent last June, compared to last month when rates were floating just over four per cent.
Getting pre-approved is one thing, but what a buyer can actually afford can often be vastly different. Case said.
"[It's] he difference between, what your max budget is versus what you can afford and what's comfortable for you," Case said, also suggesting that prospective buyers meet with a mortgage specialist.
"They'll actually sit down with you and, and help break down those costs and really work on a budget that you can afford," Case said.
The term "house poor" has been around for ages, but for this generation of home buyers that really is coming to fruition. There was frantic buying at the height of the pandemic when interest rates were at record lows. However, the peak of COVID years continues to get further away and the markets continue to fluctuate, even now with the Bank of Canada's key interest rate that steadily climbed throughout 2022 before finding a plateau by February 2023.
Jay Tysoski, a partner and Mortgage Broker at Mortgage Connection, said being "house poor" could be more of a reality for many owners.
"Maybe they are financially making their payments and they're able to afford everything that they have, but they also never prepared for a life of not being able to travel when they want to or not being able to eat out or do different other things that they would have expected that they would continue to be able to continue to do simply because they were doing the "grown-up thing" and buying a home," he said.
He stresses that it's important to take into consideration the whole financial picture.
"Just because you can read it doesn't mean that you understand it. You want to make sure that if you are stressing the limits of your affordability, you have to understand on the backside what the consequences of that could mean, which could mean missing payments, your mortgage defaulting, the bank taking ownership of your home," Tysoski said, adding those are some of the extreme examples the broker makes when a buyer purchases a home beyond their means.
Both Case and Tysoski reaffirm that buying a home is an important purchase and that it shouldn't be done in haste or without proper research and consultation with trusting agents and advisors.
