Deciding when to buy
Factors to consider include your personal situation, and your judgment of whether the market will be going up or down, that is, "market timing". Here are a few tips:
Over the long term, the experts generally agree that B.C. Lower Mainland real estate will increase in value, mainly due to the predicted increase in population. Although growth has slowed, B.C. continues to experience a net population growth.
It is usually possible to get a good idea of whether prices are currently going up or down by consulting a busy realtor. Note, though, that the price direction frequently depends on the particular type of property and the particular location. Even when the market is widely falling, there are some areas that are still rising, and vice versa. For example, from May 1997 to May 1998 most B.C. Lower Mainland real estate fell somewhat, but condos in East Vancouver rose in average price. An experienced realtor can often make a reliable judgment of price trends based on a wide range of indicators. For example, the numbers of property "showings" and "purchase offers" become known through the grapevine of realtors. These indicators show the newest price trends weeks or months before actual sales do, because of their greater volume and because of the delays in reporting of actual sale prices.
Spring and fall usually have greater market activity, and a wider choice of reasonably priced properties for sale, than summer and winter. However, looking back over many years it is clear that no season is predictably the least expensive time to buy in this area. Sometimes the best time to buy is when nobody else is looking: a little-known secret is that there is usually a noticeable drop in prices at the end of December, creating an opportunity of which very few buyers take advantage. The drop may reflect a supply and demand imbalance caused by some investors needing to sell before year-end for tax purposes, at the same time that buying has stopped because most buyers are busy with holiday festivities.
Should you buy a condo prior to or during its construction? After all, the ads proclaim there are "ONLY 17 LEFT!" Those who have experience in buying before construction is completed often advise against it, according to a survey of purchasers in Greater Vancouver reported in the Real Estate Weekly. When condos are sold to the public long before they are finished being built, it means the big investors have decided it is more profitable to sell than to buy at that time and price.
More than half of B.C. residents move at least once in five years. Obviously "the best time to buy" is not when there is a possibility you will soon be forced to turn around and sell due to a job transfer, marriage, or job loss. This is because of the fees, taxes and other transaction costs, which your realtor can estimate for you. The total costs of buying and subsequently selling can amount to approximately five to twelve percent of the value of the property, so hopefully you are buying at a time in your life when you will be able to keep the property a reasonable length of time, over which to spread these buying and selling costs.
If you are a first-time buyer, the standard advice is to save up a reasonable down payment in order to maximize your buying flexibility and minimize your interest costs, and then "BUY AS SOON AS POSSIBLE!" Actually, if you are employed, "reasonable" minimum savings could be anywhere from 6.5% to 35% of the purchase price depending on your circumstances, so general advice isn't too helpful. Infrequently, properties are even bought with a zero or 1% down payment. You can substantially reduce the cost of mortgage insurance by waiting until you have a large down payment.
Often it's said "better to be paying towards your own equity (ownership) than into your landlord's pocket". From an investment point of view, that is generally true--most people who buy a home develop vastly greater wealth than those who do not. However, the question of when a particular renter should jump to ownership is somewhat complicated. As long as housing prices are relatively stable, one of the important questions to answer is whether your current rental payments are greater or lesser than the comparable costs of ownership. These "comparable costs" are the sum of (a), (b) and (c) where (a) is the interest portion of the mortgage payments you would be making (that is, the monthly mortgage payments MINUS the principal portion), (b) is the foregone interest on the down payment (that is, the amount you would earn if you invested it elsewhere), and (c) is the sum of other costs (e.g. annual taxes and maintenance).