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Blog by Linda M Linfoot

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Understanding House Prices

Understanding house prices

A home may be one of the biggest investments you ever make. Saving up a down payment is just the first step. Find out more.

What factors affect the value of a home?

  • Location: Real estate people always say “Location, location, location.” That’s because the area you live in will be the biggest factor affecting your home’s price. It’s smart to buy a home where housing prices are likely to increase. Also, the people who may buy your home from you one day may be willing to pay more for a home that is close to schools, sports centres, stores, services, and so on. Keep that in mind as you look.
  • The condition of the home and the property it is on: Does the home need a lot of repairs? How is the roof, plumbing, and electrical wiring? A home in good repair may be worth more. Also, the condition of the outside of the home, the lawn, gardens, driveway, and trees will all affect the value of a home. These are the first things that buyers see, and are together known as curb appeal.
  • Renovations and updates: An older home might need some work to keep it safe, modern, and comfortable. If you are buying at a home that has had some renovations, check the quality. When you do work on a home you own, do it as well as you can. Poor work can lower the value.
  • The economy: There are some things you can’t control that affect house prices, like interest rates. Higher interest rates mean it costs more for a mortgage, so fewer people buy homes. When that happens, the prices of homes can fall. Lower interest rates, on the other hand, can boost buying and drive prices up. House prices often go up for a while, and then come down a bit. Try to find out as much as you can about how prices are changing, or may change, when deciding to buy or sell a home. Often there will be stories in the paper about housing prices.

How much is my home worth today?

If you’re considering buying a home, or you just bought one, you know how much it’s worth. But if you’ve owned your home for a while, its value has probably changed. Here’s how you can find out how much it’s worth now:

  • Call Linda Linfoot: Ask me for an estimate of your home’s value. I can do this at no charge or obligation. I would like to earn your business in the future.
  • Ask an appraiser: Your bank or a real estate agent should know a number of appraisers. Banks use them to estimate house values before they approve mortgages. You can also look in the yellow pages. An appraiser will charge a fee for the service.
  • Check to see what other homes in your area have sold for recently: Compare your home with similar ones that have sold. Unless you keep up with what’s happening in your area, this information may be hard to get. Ask Linda Linfoot for help if you can’t find it yourself.

How much will my home be worth in the future?

To estimate a home’s future value, you will have to do some informed guessing. Start with finding out what has happened to prices in your location over several years.

City

Price, 1990

Price, 2005

Total % increase, 1990–2005

Average % increase per year

Halifax

97,238

188,484

93.84%

6.26%

Saint John

78,041

119,718

53.40%

3.56%

Quebec City

81,462

141,485

73.68%

4.91%

Montreal

111,197

203,720

83.21%

5.55%

Ottawa

141,562

248,358

75.44%

5.03%

Toronto

254,890

336,176

31.89%

2.13%

Windsor

106,327

163,001

53.30%

3.55%

Greater Sudbury

108,596

134,440

23.80%

1.59%

Winnipeg

81,740

137,062

67.68%

4.51%

Saskatoon

76,008

144,787

90.49%

6.03%

Calgary

128,484

250,832

95.22%

6.35%

Vancouver

226,385

425,745

88.06%

5.87%

Source: Canadian Real Estate Association (MLS®) http://www.theglobeandmail.com/globe-investor/investment-ideas/investor-education/understanding-house-prices/article658078/

Should I buy a home now, or wait and save more money?

Sometimes people can’t wait to buy a home because of family or personal reasons. For example, they may have a new baby coming and need more room. Or, they are worried about house prices going up faster than they can save.

What if you don’t have the down payment you need for the house of your dreams? Should you wait and save more, or find another way to borrow the money you need? You won’t be able to get a standard mortgage but you could get another type of loan.

Should I save more or borrow more?

Here is a summary of the reasons to buy now, or wait.

Should you:

Reasons for:

Reasons against:

Wait and build up a large down payment?

You will pay less interest. You can avoid paying for mortgage insurance. You reduce the risk of not being able to pay back the loan if the value of your home drops and you have to sell.

You have to wait to own a home and you will pay more rent. You could have put that rent towards paying a mortgage, and owning more of your home faster. You have to be disciplined or you could spend your savings on other things. In some areas, house prices may rise faster than you can save the down payment.

 

Buy earlier with some other type of loan?

• You can stop paying rent sooner and get into a home faster. • You have the chance to own more of your home sooner. • You don’t risk house prices rising more than you can afford.

• You will pay more interest. • You will have more worries if you take on more debt than you can handle. • If you have to sell and the value of your home drops, you may not be able to pay back the loan.