Most of us growing up are told that buying a house should be one of your top priorities in life. If we’re lucky, our parents are willing to either lend us some money for the down payment or even give us money to help us out— and encourage us to buy a house. Of course, we all need a place to call home so it makes perfect sense to invest in a home but there are a lot of things to consider and I’m here to give you my perspective. The world today is filled with uncertainty. Russia has just invaded Ukraine. We’ve been living in a pandemic for over two years, inflation is on the rise and the economy has been touch and go for awhile. The question is, “Should I buy a house now?” and if not now, when?
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Should I Buy A Home Now?
It’s Feb 27, 2023 as I write this. These past two years have been devastating for so many people, including myself. Nobody was planning for a pandemic to completely upset their lives. We’ve all been going through an incredibly difficult time, living with the threat of Covid19 and an uncertain future. A war is taking place in Ukraine as it’s being invaded by Russia. Even the climate of earth is rapidly changing and becoming more unpredictable. This wasn’t exactly the life we had planned. In fact, most of our plans have gone out the window lately but we are still trying to create the life we have always wanted and buying a house is the dream of most people, especially couples beginning their live together with the hope of starting a family.
A home is a place we can always return to and feel safe and secure. I believe this is the strongest reason for buying a home, because we all want to know that no matter what happens in life we have a roof over our heads that nobody can take away from us. A home represents security and all humans need a sense of belonging and security in order to live their best life. Buying home is much more than a simple investment, in fact, I believe the reason why people want to buy a home has more to do with the security it gives them more than the potential equity they may gain from the value of the house going up over time.
Where You Live / Why it Matters
In the short-term, buying a home is not the best way to invest your money. The real estate market has a cycle and it tends to crash every decade or so but eventually it always bounces back and climbs higher than it was. On average, real estate prices go up, which is why investors often recommend buying a home, whether that’s a house or a condo doesn’t matter. A house with land is typically a much better investment because you own the land and land is becoming more scarce, especially in large cities or in the suburbs. But all homes are not equal because your location makes a big difference. The upside of buying property in New York or Los Angeles, California is always going to be greater than buying a home in Kentucky or Madison, Wisconsin.
I live in Vancouver, BC and the prices have skyrocketed over the past couple decades. Vancouver is one of the most expensive cities to live in. It’s unaffordable for most people but because of the influx of foreign money, the prices have increased dramatically, which is great if you bought 10 to 20 years ago, but only the wealthy can afford real estate in Vancouver today. This has caused many people to leave the area.
I screwed up because I didn’t buy property twenty years ago when it was still very affordable and today I pay the price, being forced to rent, paying $2450 every month. This is an average price for a one-bedroom condo. And yes, you can get cheaper by moving to the suburbs, but you won’t find a decent place to rent for under about $1650 even one hour away from the Vancouver,
Around 2019 I was renting a condo that was worth about $160,000 and today, that same condo is worth about $675,000, if not more. Salaries have not gone up much since then and yet home prices have risen astronomically. I wish I had bought that condo back in 2019 but the question is, should I buy a home now, in the market as it is today?
If you’re thinking about buying real estate with the hope of making money in the short-term, I’d say forgot about it. You likely will lose money unless you understand the market and plan on investing some money into a fixer-upper and then flipping it. This whole notion of flipping real estate has become popular with all of the TV shows that have made this look like an easy way to make quick money, but unless you buy the right property and know the costs of renovating, and/or you can do the work yourself, you’ll likely fail to make money in the short-term. I don’t recommend going down this road.
On the other hand, if you have some money saved up and you’re looking to buy a home for the long-term then buying a home might make sense, but it might not, because if the market is in a down trend or stable then you might be better off renting in the short-term and wait for the market to crash and then buy near the bottom. Right now, as I write this in early 2023, I don’t think that buying real-estate is a good idea because of the uncertainty of the market and the greater world we live in. Many people smarter than me have been predicting a major real estate crash for quite some time but it hasn’t happened yet. In 2021 real estate prices went up, on average, so how do you go about deciding on whether or not you should buy a home now or later.
As they say, real estate is local, so you can’t generalize about the market based on what the country is doing. What matters is where you live and where you intend to buy. What’s going on in the market where you live.
Buy What You Can Afford
As I said earlier, buying a home provides us with a safe and secure feeling that we have a place to return to and build a life. Owning a home can be priceless when it comes to your peace of mind, with one caveat, and that is only if you can afford your home. Too many people borrow the maximum amount that the bank will loan them but I don’t advise that you stretch yourself too thin. A better question is : What can you comfortably afford? If you’re buying your first home, consider buying a home that needs some work so you’ll get a nice discount, and then either do the work yourself or hire someone competent to do the work. You’ll be inconvenienced in the short-term but this will increase the equity of your home and will enable you to have a smaller mortgage because the price will reflect that the house was less than perfect.
Or, consider buying a smaller home that is immaculate rather than a bigger home that needs work, but costs the same as a smaller home. How big of a home do truly need? Learn to live with less and within your means. Unfortunately, we live in a time when people often think that more is better and bigger is necessary. We often don’t need all of the stuff we have. Everyone is buying an SUV but how many people truly need a large vehicle. Yes, of course, sometimes you absolutely need a large home but I recommend being thoughtful about what you need.
From my own experience, I’ve learned that the burden of debt and reaching beyond your means is not worth the price of what you’re buying because debt will rob you of your peace of mind. The last thing you want is a home that makes you feel stressed because you bought more than you can afford. Don’t do that. Buy less than you can afford, and think about how you’d feel if the price of your home went down because of a real-estate crash or correction. If you’re buying for the long-term then the short-term decline of the market shouldn’t bother you, but if you’re expecting your home to increase 20% every year then you’ll likely be disappointed. Look, it might go up every year but just don’t expect. Make your decisions based on realistic data, not your gut feeling.
The truth is nobody knows what the future will bring but we know that we’ll always need a home, a place to call our own; which means that investing in real estate is always a good idea, even if prices decline in the short-term. Choose your area well. Walk the neighborhood during the day, and night and weekends. Get a sense of place. Is the area growing or in decline? Is the neighborhood desirable? Do you feel safe walking around? Think about the future and remember that the most important thing to consider when buying real estate is location.
I wish I had bought a home twenty years ago and I have been paying the price of not having a place to call home. The one thing I’ve wanted my entire life is the stability and comfort of a place to call my own and I failed to do that. This haunts me to this day. I grew up in a house in the suburbs and it was so nice having a backyard with grass, but in the world we live in and the cost of owning a house in Vancouver, BC it seems highly unlikely that I’ll ever have a place to call my own. I write this in the hope that someone reading this article will avoid my mistakes and buy a home they can afford so they can build a life worth living. It’s worth it and I wish you the best of luck in whatever you decide to do.