Headlines, Headlines: ‘I Be Yelling Rates Over Everything, Rates On My Mind’
The media always has your best interest at heart, right?
Wrong.
Take it from a child of the 90’s who could easily sit through the one-minute intro to ‘Saved by the Bell’ (queue the guitar solo) and now can’t make it through a 15 second YouTube ad without getting antsy – my point? It’s getting harder and harder to capture our interest.
So, in a world where the modern public (myself included) has the attention span of a distracted goldfish, what’s the media’s answer?
More. Sensational. Headlines.
Interest Rate Hikes Will have Immediate Impact on Canadians Canadians to Expect 30% Higher Mortgage Payments Interest Rates Turn the Heat Up on a Housing Market in Crisis 40% of Canadians Overwhelmed by Debt Nearly 1 in 4 Homeowners Say They’ll need to Sell
How about this gem? 50% of Canadians say they’ll need to make a decision before their next renewal (umm, yeah thank you Captain Obvious)
I’ve said it before and I’ll say it again – sensationalism sells.
While it’s no secret that the cost of goods and cost of borrowing are both rising steeply and having a direct impact on Canadians, how it’s being positioned in the news would have even the most rationally-minded person running for the hills.
Currently we’re experiencing a hangover from an unprecedented surge in housing prices and demand fueled by an unforeseen pandemic, drastic changes in lifestyle patterns (that boosted household savings for many), and enduring economic stimulus combined with a period of dangerously low interest rates (this list is not exhaustive by the way).
Our memories as consumers are shorter than Britney Spears’ first marriage, so I urge you to keep this in mind – we’ve been here before. Markets move in cycles, and while we’ve seen different iterations over the years Newton’s third law still applies – what goes up will eventually come down (and then go up again). So, here’s a brief checklist of things to consider when you’re thinking about buying property:
1. Do I need somewhere to live?
2. Does homeownership (and the related costs) align with my lifestyle?
3. Can I see myself living in said home?
4. Can I afford the payments?
5. Can I afford the payments for the foreseeable future, even if they fluctuate?
6. Have I reviewed and am I comfortable with my current cashflow situation?
Take for example your current car loan (assuming you have one) – interest rate was probably a secondary decision when you got the financing. Why? Because the dealership likely approached you from a payment affordability perspective rather than a rate driven conversation, which is just common sense.
Real estate is a long term play so if you plan to be in the market for the duration, then it’s best to take a deep breath and potentially take advantage of some of that uncertainty that’s floating around.
For the first time in a few years, buyers can pick something up without the premium price tag – heck, maybe even with subjects and under asking price.
Not to mention the potential savings in hidden costs you might otherwise incur on subject-free-offer made in haste without inspection – things like that furnace replacement ($3500) and fireplace servicing ($300), that broken dishwasher ($700), or that leaky bathroom faucet ($500) – or those bigger ticket items that can cost thousands (like that end-of-life roof or structurally unsound deck).
But at the end of the day, you need to do you – just make sure the reason your appetite for real estate has shifted is driven by internal forces and not by Groupthink.
In the words of the great Drake, I guess maybe we all “overdosed on confidence” over the past couple of years, but it’s important to keep in mind that your base needs didn’t change – only the headlines did.
But that’s just my 2 cents (adjusted to 3 cents for inflation).
Questions? Let’s talk.