Lindsay: I am a first time buyer and am thinking about buying, but still I am quite nervous about talk of the recession. You have been around for a while, is this a good time to buy? How does the market today compare to the last recession in the early 90’s?

Mel

Hi Mel, thanks for the question about today’s market. I have been comparing the current market to the one in the early 90’s over the past few weeks prior to your question and have found some interesting data. Having gone thru the boom of the late 80’s and the recession of the early 90’s, I have seen pretty much every type of market the economy can toss at an agent.

To answer your question about buying now, I feel that this is the best time in the past 15 years to purchase a home. The people who most benefit from the current market are first time and move up buyers. Homeowners who are downsizing are a little more at risk due to the fluctuations in values in the different price ranges. I did some historical searching and found affordability better today than is has been in almost 20 years. Here is an example

Historical sale 1991
Semi detached home sold on Vancouver Cresc.: April/1991
Selling price: 130,000
Assume buyer uses 5% down – mortgage is $123,500
$123,500 at the current rates (April/91) 13% = $1,361/ Month

Recent Sale 2009
Semi detached home sold on Vancouver Cresc.: January/2009
Selling price: 166,000
Assume buyer uses 5% down – mortgage is $157,700
$157,700 at the current rates (Jan/2009) 3.36% = $775/ Month

The homes used as comparables were a few doors from each other on Vancouver Cresc. and you can see that the increase in value for homes has been $36,000 but with today’s current rates the cost difference in carrying the mortgage is $586/ month. This is huge! If you take a 5 year mortgage the savings is $35,000! So we know it is cheaper to carry a home but if you are choosing between renting and buying it might be difficult to find a home to rent for around $1,000/mth and if you did, 5 years from now you would have spent $60,000 with nothing to show for it.

Markets come and go; they fluctuate and one constant I have noticed is that when the media is promoting “doom and gloom” many people feel that things will never change – but they, do and the people who take advantage of markets like this end up winners.

I will leave you with a great Canadian quote from Wayne Gretzky: “a good player plays to where the puck is.. a great player plays to where the puck is going”. The people who are the most successful with real estate buy knowing the values “are going” – UP!
They always do.

More info on the market can be found at www.soldbylindsay.com

Lindsay Smith
www.soldbylindsay.com