The cost of waiting to buy. As with a purchase of most items prices are subject to change. If you are buying groceries that change can be a few dollars. For the purchase of real estate the cost of waiting to buy can be significant up or down depending on the market conditions.
According the the Canadian Real Estate Association the average price increase for 2018 was a modest 2.51%, well below the staggering increases since the year 2000. Even considering a modest 2% range how does this impact the cost of waiting to buy your first home.
If you are renting should you buy or wait and what is the cost of waiting to buy?
So let’s run a comparison. I collected some average numbers online to help with our example.
According to Rentals.ca the average rent in BC is $1682. According to Zoocasa.com the average price of a condo in 2019 in Port Coquitlam (for example) was $458,000.
Sue and Adam currently rent a 2 bedroom condo for $1700. They want to buy a 2 bedroom condo at $450,000. They have saved some money and have a nice gift from their parents for a total of $50,000 for the down payment. Including the CMHC premium their mortgage will be $412,400. Considering a 5 year fixed mortgage and 25 year amortization the payment will be $1900 per month. The monthly contribution to property taxes is $150 and strata fee of $320 for a total monthly cost of $2370.
If they wait to buy for 1 more year the condo price will have risen by $9000, they will have spent $20,400 in rent and the $11,500 they would have paid towards principle pay down on the mortgage. The cost of waiting to buy in this case could be over $41,000. Even if you factor in the cost of interest of $11,000 they paid on the mortgage the net loss is still $30,000.
Bottom line: Know your own numbers. You may be surprised to know how much it is costing you to wait to buy.
Note: This is an example only and not advice on the current or future market conditions.
Everyone has a different situation and the timing will depend on a variety of factors. Before you decide whether to buy or not buy, consult a professional realtor and an independent mortgage broker to review your needs so you can make an informed decision.