Call Text Email
Background Image

September 3 2022 | Buying/Selling

Have the Prices of Homes Become More Affordable?

Hello friends and family! Danielle Demerino, Toronto Real Estate Agent here for a quick blog! As you all know, I have continued to push my buyers and sellers to remain positive and keep their head in the real estate game. We have seen price drops, interest rate climbs and inventory soar! I came across a post the other day that really peaked my interest, which begs the question; have the prices of homes become more affordable? Let’s take a look!

Many people believe that the interest hikes have made it unaffordable to purchase real estate and have chosen to close their wallets, especially since the Bank of Canada announced the last interest hike of a full point (1%). We have watched the number of transactions drop by about 30% (year to date), but what people aren’t realizing is purchasing a home is actually averaging out to the same monthly price as it was in February, actually it has become slightly less expensive.

Let’s use an example based on a five year fixed rate mortgage, a 25 year amortization and the buyer is NOT a first time home buyer (which changes the amount of land transfer taxes). Note: these numbers are courtesy of Tom Storey @thestoreyteam.

FEBRUARY PRICES:

Purchase Price: $1,000,000
Interest Rate: 2.5%
Downpayment (20%): $200,000
Land Transfer Tax (Toronto): $32,950
Monthly Payment: $3,583

TODAY’S PRICES:

Purchase Price: $800,000
Interest Rate: 4.5%
Downpayment (20%): $160,000
Land Transfer Tax (Toronto): $24,950
Monthly Payment: $3,542

Therefore, while interest rates have gone up, the price of houses have come down which essentially hasn’t changed monthly payments by much. In the long run, it’s better to buy at a lower price because interest rates could come down in the future and with a lower ticket price, you are paying a lower down payment. For all of you cash buyers out there…now is your time to shine!

As the summer comes to an end, people will start shifting their mind set away from vacation mode and back to life mode. We anticipate that the number of transactions will start to increase as the new interest rates are accepted by buyers. Don’t let the market shift scare you out of buying or selling. Call today to discuss any real estate questions you might have!