How to Review your Finances before Buying a Home
The COVID-19 situation has many people confused about what to do, whether they’re selling, buying, or constructing. While the numbers from the Calgary Real Estate Board (CREB) are interpreted as a double-edge sword, it’s hard to determine right now whether the coronavirus pandemic will negatively affect Calgary’s housing market like it is doing elsewhere in Canada.
During this time, many will be practicing social distancing and even be forced to self-isolate, which means now could be a good time to re-evaluate your finances if you’re planning on buying a home.
COVID-19 Affects on the Market
When last we looked at the Calgary housing market, the Bank of Canada had its key interest rate at 1.75%, but with the coronavirus pandemic, the Bank has since cut the interest rate down to 0.75%. It is even expected to go lower to 0.25% at the next meeting on April 15th.
Calgary’s housing market is expected to experience a demographic shift with Baby Boomers downsizing. The market is providing more affordable products, especially new condo constructions.
According to chief economist Ann-Marie Lurie on the Danielle Smith Show, the prices of condos have declined over 17% since 2014. Additionally, detached homes have decreased about 9%. This provides opportunities, but timing is crucial.
Calgary Housing Market Results
The CREB announced that there was a 23% increase in sales between February 2019 and this past February. Sounds great, except only 1,200 homes were sold last month, which is below the market numbers before 2014 when there was a recession. Ann-Marie Lurie remarked that the number of active listings are on the decline as well. On the bright side, there is still more supply than demand, so prices are low.
Tips for Reviewing Your Finances
There are many questions you and your partner must ponder before diving into house-hunting, such as:
- Do you have an emergency fund?
Owning a house means saving for a rainy day. You never know when you’ll need some cash for an emergency, like a leaky roof. A good emergency fund should have a minimum of three months’ worth of income.
- What are your other financial responsibilities?
If you have debts to pay off, it’s best to deal with those beforehand because buying a home comes with a hefty price tag. Not only are you paying for the house itself, you have to pay closing costs, such as insurance and legal fees. Not to mention pay for any repairs the seller didn’t do. Moving costs are another expense. So, if you or your partner have a student loan or high credit card debt, consider paying them down first.
- What is your work situation like?
Do you and your partner have a stable job? With COVID-19, many have the option to work remotely, so it’s business as usual. However, others are not so lucky. If you have a retail position, stores are reducing hours and even letting people go. It may be best to put house-hunting on hold for a little while since no one is certain of what to expect while we’re in the middle of the coronavirus pandemic. On the other hand, Calgary’s market has an oversupply right now, so prices are low and spring is right around the corner, which means there may be more activity on the market. This is all food for thought. Your situation is unique, so you must discuss these matters with your partner.
- Can you afford a down payment?
According to Daily Hive in September 2019, a report estimated that a 5% down payment (the minimum) required a year of saving in order to buy an average-priced Calgary home. This was calculated with 20% of one’s income being put aside towards the down payment. There are several ways to acquire money for a down payment aside from simply saving your money. Family members may give you the funds as a gift or, as a first-time homebuyer, you can use money from your RRSP.
Calgary House Finder Is Here for You!
COVID-19 has sent homebuyers, as well as sellers, into a tailspin because no one knows quite what to do. We are here to let you know that you’re not alone and that you can always contact us by phone, fill out our online form, or email us with your questions and concerns. First-time homebuyers often need more guidance, which is understandable. Calgary House Finder is dedicated to keeping you informed on the housing market’s activities.
Stay safe, and contact us today!