Why Waiting is an expense.
Historically speaking we're all aware inflation has taken our housing markets for a ride of its life. Generally increasing in value 3-5% has been an accepted norm for years. However within recent history our market has heated to an almost uncontrollable temperature with the desire to own your own home fueling the Canadian market well past its boiling point. What does this mean for buyers and sellers alike? Well if you're in the market already and own your home it can at times cancel itself out with the inflation of your value only going towards purchasing an inflated value of your next purchase. If you're in this situation and plan to utilize your equity for this purpose your monthly payments and budgeting won't typically change too drastically if at all.
The downside is for buyers not yet in the market with an asset they can leverage from one home to another. So the question is should you consider buying now as a consumer or wait?
Most people I discuss this with look at it from the perspective of savings and not from the perspective of growth in investment opportunities. It's more so a backwards thought process in which they want to have more first before investing to make more later which actually hinders ones ability.
simple inflation math would state if you have a home at $300,000 as a first time home buyer based on average norms you can expect to see this property increase 3-5% meaning after one year of ownership you're able to expect a return of $9000-$15000.This is exclusive of the money you would normally put aside monthly. Not including the rent saved on average $1500 which would be your typical mortgage payment. With front loaded interest approximately half of your monthly payments would go towards your principal amount owing and thus that $750x12 would give you an additional return of $9000.
So the question I pass to you is simple, are you able to save $18000-$24000 a year while paying rent and expecting simple margins of inflation to occur?
This scenario can be addressed as a best case scenario in a generally stable market. The concerns arise when you look at a boiling point such as our Canadian markets now. A large surplus of buyers and limited market inventory in most populated areas has taken this increase in value margins and basically thrown them out the window; of the home that went up in value 20-30%.
If you're only waiting because you believe you're saving more money ensure you calculate all means of return on ownership from inflation to principal payments. A majority of individuals will realize they're only putting themselves back further every year.