A lot of people looking to buy a house try to time the market to find the best time to buy. In a perfect world the best time to buy would be when interest rates are low, price of homes are low and the number of homes to choose from are high. Wouldn’t that be nice!

Well, that’s not realistic because each of the below three factors impacts the housing market and the combination of these all work together, or against each other, to create the real estate market:

Interest rates – The biggest cost of home ownership is the interest rate you pay for your mortgage, and that rate is determined by the Bank of Canada and what they set Prime rate at. The Prime rate is the interest rate banks and lenders use to determine the interest rates for mortgages, consumer loans and lines of credit. Changes in the economy due to inflation, employment and political events will impact the Prime rate determined by the BoC. Interest rates fluctuate and when they’re low, you’ll pay less to borrow the money to pay for your house. When rates are high, you’re going to be paying more. Rising rates make homes more expensive for buyers, thereby reducing the demand for home purchases.

Prices of homes – Interest rates will impact the price of homes because depending on the cost of a mortgage, more or less homes are likely to be on the market based on consumer confidence. There is a direct relationship between the price of homes and interest rates. When interest rates and the cost of borrowing are low, it can drive up the price of homes as more potential buyers are in the market and looking to buy. Sellers can benefit from this with multiple offers on their property which can drive up the price. This is referred to as a ‘sellers market’. Opposite of this is when interest rates are high, the price of homes can go down because there’s less buyers in the market, usually because of lower consumer confidence. The price of homes can reduce with more homes on the market versus buyers. This is referred to as a ‘buyers market’.

Number of homes available – Just like interest rates impact the price of homes, they will also impact the number of homes on the market at any given time. As mentioned in the previous point, when there are more homes for sale then there are buyers we find ourselves in a ‘buyers market’. This results in less competition for the homes that are available, more time for buyers to make a decision and less likely for multiple offers on homes. On the flip side, when there are more buyers and not as many homes for sale, it’s called a ‘sellers market’. In this type of market we tend to see quick sales above list price and multiple offers can become common. When there’s just as many buyers as there is sellers, we find ourselves in a ‘balanced market’.

At the end of the day, trying to ‘time’ the market is something you can try to do, but it’s difficult to predict what ‘could’ happen and there are unpredictable events that will influence interest rates, which then impacts the price of homes as well as the number of homes for sale. When considering when is the right time to buy a home, the answer is simple – buy a home when you can afford it and when the time is right for you.

If you’re looking to buy a home in Red Deer or Central Alberta, feel free to contact me and let’s make it happen.

Have an amaZing day!

People First. Homes second. 

Garrett Zimmerman

Realtor

403.506.5795