So, you bought a home in 2021 or early 2022 at the peak of the housing frenzy, and now you’re worried you overpaid and won’t see a return on your investment. You’ve seen countless news articles and clips talking about inflation, a recession, and the cooling of the real estate market, which hasn’t helped ease your fears that you might have made a major mistake.
First, take a deep breath.
Second, stop buying into your fearful thoughts and take a moment to think logically about your investment. Tune out all of the noise and “what ifs” and take in the facts.
We know when it comes to your home, you’ve invested much more than just your finances; you’ve invested your emotions. Don’t let the feeling of having “overpaid” for your home take away from your happiness and achievement. You’re a homeowner, and that’s something to feel proud of regardless of the price tag that came with it.
If you bought at the peak of the market and fear the unknown, here are a few things that could help ease your mind and help you enjoy your home again:
- Real Estate is a long-hold game, and you’re just at the beginning.
If you purchased your home in the last year or so, you’re at the beginning of your homeownership journey.
Unless you purchased your home to flip it and make a quick buck, you’ll likely still see a great return on your investment in the coming years.
While the future of the real estate market is somewhat uncertain, we do know that downturns can’t last forever, and anything that occurs in the next couple of years should pass before you’re ready to sell your home.
People typically spend between 5-10 years in their homes before selling, which means you will likely wait out the market’s potential downturn and sell when things begin to rise again. You will most likely see that your year-over-year return is still positive, albeit slower than we saw between 2020 and now.
- You probably locked in a better mortgage interest rate than anyone could get now.
When real estate prices were at their peak, mortgage interest rates were at their lowest.
We saw mortgage interest rates plummet in 2020 and remain low through 2021. Only this year did the Bank of Canada adjust and slowly increase rates. Now, the average interest rate is approximately 7% (as of October 18, 2023), compared to this time last year when it was 5%.
What does this mean? Your monthly mortgage payment is likely similar to or even lower than those securing properties now at lower sales prices. You’ll probably pay off your principal faster as less of your monthly payments will go toward interest.
For example, if you purchased a home at the top of the market for $600,000 at a 3% interest rate & amortization of 25 years and a minimum downpayment (5.9%), your monthly payment would be roughly $2779. Even if someone purchased a property for $580,000 with the current rate of 7.14% & amortization of 25 yeaers and a minimum downpayment (5.7%) their monthly payment would be approximately $4033.
- As of right now, home prices are still on the rise.
Sales have dropped, but prices haven’t.
While we’re not seeing bidding wars and waived conditions anymore, we’re still seeing a steady rise in prices. There have been some slow months, which has resulted in smaller increases in year-over-year price comparisons.
In September 2023, we saw an overall growth of 2.0% in home prices in Ontario compared to this time last year. Your property has likely still appreciated in value since you purchased it.
Keep in mind that slow and steady price increases don’t mean that you should look into selling now. As mentioned, sales have dropped significantly in the last few months, and rising interest rates make selling homes more difficult. It’s still best to hold your property for the next few years to get the most return on your investment.
All this to say, your property will likely hold its value and produce positive returns in the long run, even with economic uncertainty.
Feeling buyer’s remorse is NORMAL, especially after such a huge purchase. We’ve all had it happen before when we finally cave and purchase that thing that we’ve been eyeing, only to see it go on sale afterwards. While you may feel frustrated and question why you didn’t wait a little longer, ask yourself: am I happy with my purchase?
If you still love your home, can continue making your monthly payments and don’t need to get out now, stop making yourself worry with worst-case scenarios.
Are you still feeling stressed? Reach out to us! Even if you’re not looking to buy or sell right now, we can share our expert advice with you & evaluate your home to help ease your mind.
