Is It Really a Good Time for You to Buy a New Home?
By CATHOLINE BUTLER
VANCOUVER - The Real Estate market is sizzling and it just got turned up several notches since Canada Mortgage and Housing Corporation (CMHC) announced zero down payment, which means people can literally buy a house without putting any cash down.
The Celtic Connection recently spoke to several Celtic real estate agents and a mortgage specialist about what this all means for first-time buyers who appear to benefit most from this plan...or do they?
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DUBLIN-BORN Sean Holden and County Tyrone native David Campbell work together as a team at RE/MAX Real Estate.
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David Campbell - RE/MAX
County Tyrone-born, David Campbell of RE/MAX David Campbell Realty has been selling real estate in Vancouver for over 22 years. His partner, Dublin-born Sean Holden, has been with him for four years.
"I think, CMHC's concept is that this plan would benefit the people that have good paying jobs, perhaps a young family that can never quite get around to saving up a down payment to buy a home, so it allows them to get started and buy a house," said David Campbell.
“From a strictly financial point of view, they are going to be putting themselves greatly in debt. Not only will they be in debt for more than the cost of the home they are buying, by the time the buyer pays the CMHC insurance fees, property tax, lawyers fees to close, they could literally be mortgaged to between 105 and 110 percent of the value of the home.”
Campbell suggests that normally he would advise people to take a few years and save a down payment before purchasing. He said, “your mortgage payments are going to be less and it’s going to be easier to get ahead. And, if this is the only option available for some young families, then they must look at it as a very long-term plan.”
While some buyers might consider undertaking the high debt load for a short term and then sell for profit, Campbell said, “by the time you take in all the costs of selling the house, they will never be able to get their money back out and they would eventually have to pay money to sell their home.”
The main difference in the market today unlike a number of years ago where it was a big Hong Kong and overseas Taiwanese type of market, it is mostly a local market now. Campbell said, “We had several years with a fairly flat market and there was no incentive to buy but many people are attracted by the low interest rates and they’re all trying to buy.”
The market is so hot at the moment that often numerous offers are made on the same property and people are actually getting more than their asking price. “ There are only a fixed number of houses out there, so it’s a case of a stressed real estate market now and this is why we’re receiving multiple offers,” said Campbell.
He strongly suggests anyone planning to buy a house in this market should buy for the long term and look for quality because that will always hold its own. He said, “we’re probably in a 20-year high for building starts. Much of it is apartments as many young people can afford to get into an apartment, whereas they can’t afford to get into a house.
“They are still buying condos but buyers are being very selective. They are buying the ones that have already been fixed or the ones they believe were built prior to the leaky condos, or the ones that are being built under the new building codes.”
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ASHLING DELAHUNT
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Ashling Delhunt - MacDonald Realty
Dublin-born, Ashling Delahunt of MacDonald Realty said “people who will mainly benefit from this are people with good cash flow. High income earners who don’t actually have any money put aside for a down payment. They have the cash flow, they can pay the mortgage, but they can’t come up with the five, 10, or 25 percent. These are the people who will benefit greatly from this.”
She cautioned first-time buyers to beware of the pitfalls of taking on too much debt saying, “what happened in 1981 when the interest rates started to go up, some people lost their homes and it took the market five or six years to recover from that. We don’t want that to happen again. All it would need is for the interest rates to go up one or two percent to cripple some people who are hard-pressed to pay.
“My advise to all first time buyers has always been to go and get pre-qualified. And in a market like this where inventory is low, offers are going very quickly on all properties listed. It is really important the fewer subjects you have on an offer the better. I advise everyone to subject to building inspection, I think that’s imperative.
“You do not want subject to financing on your offer right now. You want to make sure that you already know what your financing is and then you have some chance of being in there with the winning offer. If you have subject to financing right now, you have no chance.”
“So, the first and the most important thing that I tell all first time buyers, is go and get pre-qualified, then I know which property to take them to see. Sometimes, people will make a decision then as to whether they go on renting for another year.
“Right now we have people coming in from different regions and from abroad to buy and to live here. Two of my last clients were from England. The 2010 Olympics will also provide an opportunity for people to look at Vancouver and see what we have to offer. Vancouver is just one of these cities in the world that’s just so spectacular.”
Ashling said historically when there is an American election, interest rates go down and right now they are at a very low rate. She said, “according to our mortgage broker they are probably going to go down a little further this year.
“Growth in the industry is also forecast for next year and as long as inventory is at an all-time low, you are going to have huge prices like we have right now. The problem for sellers is while they may all want to get their houses on the market now to take advantage of the great rates, the question you need to ask yourself is, where do we go from here?
“Everyone is jumping on whatever there is out there if it is good quality. Anything from $800,000 to $900,000, as long as we keep it under the million on the west side right now, the inventory is flying out the window...unbelievable! My best advise to home buyers in this market is to listen to your realtor.”
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[ Watch the April edition of The Celtic Connection for more real estate interviews with Dave Barr of Park Georgia Realty, Coquitlam; Pauline Cremin of HomeLife Benchmark Realty Corp. in White Rock, Surrey, and North Delta; Brendan Hamill of Sutton Realty in Surrey and White Rock; and Dave Foran of Mortgage Intelligence who will be offering their advice on the real estate market.]
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