Will 2023 be a good year to buy a home? 2022 was certainly an interesting time for the housing market as it went through changes in price, demand, and sales. While we can’t be certain how these trends will carry over into the new year, those looking to buy in 2023 can definitely start preparing for the experience now. No matter what the market conditions are, there are things all buyers must do to get themselves ready to purchase!
First, let’s look at how the Barrie real estate market is likely to unfold as we enter 2023. We will be starting the year with an overnight lending rate of 4.25 per cent, which is of course a big difference from the 0.25 per cent we were working with one year ago. While interest rate hikes are finally slowing down, rates are higher than they have been in a few years. This means buyers need to be able to handle higher interest rates on their mortgage.
As for the housing market itself, rate hikes have had a cooling effect that will continue into 2023. According to Zolo, the average price of a home in Barrie is $705K. Homes are spending an average of 27 days on the market, and in the last 28 days there have been 386 new listings. Supply is up thanks to a drop in demand, and homes are selling for less as a result.
Check your savings
Before you start searching for properties to buy in 2023, you need to make sure your financial situation is as prepared for the experience as you are. Assuming you’ve been saving up for a down payment and mortgage payments, it’s time to see how much you’ve saved. Most people underestimate how much the entire home buying and home owning experience costs. Unfortunately, this can lead to trouble if they become house poor. Being house poor means you’re spending more than 40 per cent of your income on housing expenses just to maintain homeownership. You can read more about this here. Being house poor is stressful and can be hard to recover from, which is why you need to ensure you have enough money saved up to comfortably afford a home now.
Owning a home means you will need to pay for a down payment, legal fees, land transfer taxes, monthly mortgage payments, and utilities, to name a few items. Your down payment must be between five and 20 per cent of your home’s purchase price (with some exceptions). Down payments below 20 per cent also require the purchase of mortgage default insurance. Overall, your closing costs should be about 1.5 per cent of your home’s purchase price. Make sure you can cover these costs before you jump into the market.
Set some realistic standards
When you know you have the money to buy a property, you need to set some standards for yourself. Obviously, not every home is the same, and you won’t be able to afford any property. Think hard about why you want to buy a home, and what it requires. For example, maybe you’re trying to purchase a starter home just to break into the market, in which case you probably don’t need the most luxurious property. You might need your home to be near public transit or to have two bedrooms, but you probably don’t need it to have a pool or heated bathroom flooring. Based on your savings and the market outlook for your city, try to determine a rough budget for yourself and set your standards accordingly. When you meet with a broker (more on that below), you will be able to further refine your budget. Whatever you do, don’t go over budget when buying, or you will face the house poor situation we discussed above.
Getting pre-qualified is important to buy a home in 2023. A pre-qualification helps you see what mortgage you might qualify for and what you may be able to afford. This means you can start looking at homes in that price range. It also means lenders know who you are and have your information, so the approval process will be quicker. However, as we always like to stress, being pre-qualified does not guarantee you a mortgage. If your income, employment, or any other financial aspects change, this might change a lender’s willingness to finance a mortgage for you. Use your pre-qualification to help you determine where you stand in the market, but don’t think of it as a promised amount of funding.
Contact a broker
Finally, let a mortgage broker help you buy a home. We recognize that trying to find the right budget and secure the right mortgage product can be confusing and stressful. You don’t want to buy a home you can’t afford, or commit to a mortgage that doesn’t meet your needs. We can help you see what your needs are, and find potential lenders who might suit you. We will walk you through various mortgage products and make sure you understand everything about the process. Plus, we can connect you with lenders you may not be able to find on your own, and we advocate for you in the mortgage space. You don’t have to worry if you don’t know where to start in your journey to buy in 2023, because you have access to professionals who can guide you through it.
For people hoping to buy in 2023, right now is the perfect time to start planning. Getting your finances in order, setting priorities, and getting pre-qualified are all things you can do now so you have a smooth start in the housing market. It pays off to be organized, and one of the best ways you can start doing that is to reach out to a mortgage broker. We can help you organize yourself before you enter the market, and we’ll be with you through the whole process.
If you have any questions about your mortgage, get in touch with me!