The price of a new home in Canada is on the rise, according to data released by Statistics Canada today. Market information from March shows that the price of a new home in Canada rose by 0.3% from the previous month, marking the 12 consecutive monthly increase. While relatively minimal, the jump was slightly greater than the 0.2% advance predicted by market experts.
Numbers don’t lie – houses are expensive, competition is fierce and properties are selling fast. If you’re currently on the market for a new home, you best be prepared – a potential bidding war could be on the horizon. According to a nationwide survey conducted by the Bank of Montreal, one in four Canadians is willing to enter into a bidding war – a decision that could come back to haunt them a few years from now.
How High Are Home Prices?
Compared with March 2011, housing prices have increased by 2.6%, up from the 2.3% year-over-year growth posted in February. Not surprisingly, Toronto’s red hot market represented a large portion of the overall growth (26.6%), growing by 0.6% based on increased demand. Overall, prices were up in 11 regions in March.
The slow and steady rise of real estate in Canada has the country’s top banker urging prospective buyers to avoid spending more than they can legitimately afford. His biggest concern? That the newest batch of homeowners may not be able to carry their current debt level when mortgage interest rates rise to a more “normal” level.
Be Careful When You’re In a Bidding War
For now, low interest rates and affordable mortgage rates from the nation’s biggest banks (TD, Scotia, BMO and RBC) continue to drive a highly competitive market. When prices rise, so too do emotions. According to the Real Estate Council of Ontario (RECO), the regulatory corporation that administers and enforces the Real Estate and Business Brokers Act, the number of complaints stemming from bidding wars are streaming in. While the Council doesn’t track the exact number of bidding wars, Bruce Matthews, the organization’s deputy registrar, believes that the numbers are high.
Before you get caught up in a bidding war, it’s important that you have a very clear understanding of your budget. Without this, you could find yourself in over your head.
The Importance of a Pre-approval
With that being said, it’s absolutely crucial that you secure a mortgage pre-approval as soon as possible. A pre-approval will provide you a very specific monetary amount that you have available to put towards your home purchase. No ifs or buts.
A mortgage pre-approval will also provide you with a bit of a bargaining chip when you do enter into negotiations and a potential bidding war situation. It’s important to remember that sellers are looking for the most stable option when it comes to sealing the deal. Securing financing in advance will makes your offer far less risky than someone who has yet to approach a mortgage broker.
Be Careful What You Waive
When it comes to a bidding war, buyers aren’t only paying a premium to win houses, they’re also waiving conditions in order to get ahead. Deals without conditions are often considered “cleaner” and thus more likely to win. However, the risks often far outweigh the rewards.
Looking for a home in a hot real estate market can be extremely difficult. However, that doesn’t mean you should settle for a property that isn’t right for you. Granted, things will never be perfect, but even so, it’s important that you stay focused on the things that matter to you.