Real Estate Blog for Buyers & Sellers

Buying a Home in a Down Market

  March 20, 2019   Karen Stanko

Buying a Home in a Down Market 

Right now Alberta real estate market is in the middle of a down market, it is normal to wonder if you should wait to buy a home. Everybody wants to know how to best time the market when buying a home. It's just natural. Especially if you're thinking about buying in a down market where homes prices are declining. It is normal to wonder how low they will go and whether you should wait. 

1. Downsides of Buying 
 You’re probably thinking I will always say 'Now is the best time to buy.' Well, here is why you might not want to wait to buy in a down market. 

-If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall. 
-If you can arrange for alternate housing, a smart strategy is to sell now, wait a few months, then buy your new home when you do not have a contingent offer. 
-If you sell and buy simultaneously, you’ll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale. 
Taking a Loss on Selling Your Current Home 
 For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must reduce your price by 10%. So, instead of receiving $300,000, you would get $270,000 and 'lose' $30,000. 

Real Profits and Savings 
 Now, consider this. Say you bought this home ten years ago and paid $100,000. You're still ahead $170,000, less the costs of sale, aren't you? (This ignores monthly mortgage payments , but you would make those if you were renting, too.) 

If you are planning to move up to a $500,000 house, which is located in the same distressed market, you could probably buy that house at that same 10% discount or $450,000. It would mean you had saved $50,000. 

Review of Selling and Buying Numbers 
So you 'lost' $30,000 on the sale of your home 
 But you 'made' $50,000 on the purchase of your new home 
Doesn't that put you $20,000 ahead? 

2. Children going to Post Secondary? Or just looking for a rental property this is a Perfect Time to Buy an Investment property 
Condominiums are the best properties to invest into as the maintenance is low. Currently Edmonton is experiencing high inventory and low demand for condominium. Look for the perfect STORM where people are motivated to sell and have a tonne of equity in a condominium. I typically look at the lowest priced condo in the complex and a quick search on the history of the condominium can reveal that the homeowner may have a lot of equity in the condominium. A perfect chance to throw in a low offer with quick possession. In addition, some of the new buildings are offering strong incentives to buy into. 

3. Recreation Property 
During markets like these people put all their money into maintaining payments on their prime residence and typically will list their recreation properties. Time to snap these up.