As a location independent worker or digital nomad, buying a home may be the last thing on your mind. Yet, surprisingly, more people who used to be location dependent are purchasing a home, either as a home base or as a temporary shift to staying in one’s own country since travel is currently not an option for most people at the moment.
While the effects of Covid-19 have resulted in major economic hardship for many people, including job loss and increasing debt, somehow, the Canadian housing market is said to be “red-hot” with prices soaring to all-time highs in many parts of the country.
Despite authoritative predictions of a housing market crash, 2020 proved to be a record year and interest rates remained at an all-time low, proving the temptation to be too much for some people.
Not surprisingly, job loss and continuous lack of adequate social housing and housing subsidies in bigger cities, has also lead to an increase in people migrating out of the bigger cities to purchase or rent homes in smaller or more rural areas, where equity and/or income can stretch further. This is actually nothing new.
Throughout history, during times of pandemic, people have fled the city both for health and safety and financial reasons.
But how do you know if the timing is right for you to buy a home? And is it better to buy a home than to rent? These are all difficult questions to answer and the answers will depend on a number of factors, including where you live/intend to buy, your income, future plans, and more. That said, there are a number of things to consider when sussing out your next housing move.
These four questions should get you started.
What are the predicted housing trends in my area?
This is a very good place to start. Everyone you know might be rushing to buy a new home or leave the city, but does this mean it’s right for you? How do you know the timing is right? While the answers to these questions will vary depending on where you live, a little bit of research is all it takes to get an idea of the housing predictions in your region.
While I already mentioned that 2020 was a record year for housing purchases in Canada, what will 2021 bring?
The answer is, basically, it’s good news if you are planning on selling your home, but not so much if you are planning on buying. In general, housing prices are predicted to increase in Canada throughout 2021, some estimates marking this increase as much as 9.1%. More conservative estimates place this increase in the region of around 5.5% on a national average, but bigger cities like Vancouver and Toronto are much closer to that top estimate. However, this seems to be most relevant to detached home prices, while condo home prices seem to be remaining more static.
As people look to leave the city and need more space, in general, for the new Work From Home lifestyle, this is not entirely surprising. Two-parent families with children who worked outside the home are now finding themselves all crammed into a small space together, so it makes sense why people would want to switch up their small condo for a detached home.
On a positive note, interest rates are predicted to remain low in Canada. The Bank of Canada promised as much until 2023, in order to stimulate the economy until the point at which they predict some level of recovery.
Do I make enough money to buy a home?
Again, this depends on a number of factors. Are you a one-income household? What are your assets and expenditures on a monthly basis? Do you predict job loss or change of role or change of company due to the impact of Coronavirus at your place of work?
That said, if your income is stable and plentiful enough to consider a home purchase, there are a few online tools that can help you figure out if you make enough money to even think about buying a house.
It’s true that mortgage payments can often be the same, if not less than monthly rent, but don’t forget about things like property tax, home repair/improvement, insurance and strata/council fees that otherwise would not be your responsibility as a renter.
Free online tools like monthly mortgage rate calculators can help you break down principal and interest rate payments on a fixed-rate loan. Some even have advanced calculators that can allow you to factor in things like property tax and insurance, to give you a more accurate estimate.
These types of tools will help you figure out what your monthly payments might be if you are looking to buy a house.
Other tools will even help you figure out if you make enough money to buy a house. Once you find a home that you are interested in, you simply enter in the sale price as well as other relevant details about the down payment and mortgage and it will figure it out for you.
You can even factot in other points of debt, like car payments and the like.
Should I rent or buy?
This is a tricky one, but there are a couple of ways to figure this out. One way is to look at what you are already paying in rent, and see if you could apply that to a home that you own.
Online tools can help you subtract and factor in some of the common expenses for a homeowner, like property tax and insurance. Basically, this method looks at your current situation, just exactly as you’re just living now but as a homeowner, with no intent to sell or move anytime soon.
More advanced tools can help you factor in the predicted rates of inflation, real estate appreciation and other things to see if purchasing a home is a good long-term investment for you given your current income.
Keep in mind that these predictions are fairly volatile in terms of their accuracy, as 2020 proved, and will be different for you depending on where you live and what happens with the pandemic, but they can help you make a fairly decent beginners’ estimate or inspire some brainstorming.
Should I move now?
Ahh, the age-old question. Moving is horrible, let’s be honest, and no one wants to do it unless they absolutely have to. But should you be taking advantage of these housing trends and changes given the pandemic, even if you are usually a location independent worker who prefers to work from cafes in Bali instead of in your boring old hometown?
You may be able to take advantage of some current opportunities if you play your cards right. Do you currently own a home? Given what I’ve talked about here, particularly the increase in the housing market, now just might be the time to sell, especially if you already own a detached home and plan on moving out of the city.
But your long term goals and plans will probably be what needs to factor in the most when trying to solve this conundrum.
Do you plan on increasing your family size? What type of housing will you need in the future? Do you plan on remaining location independent or perhaps buying real estate overseas at some point, rather than in your home city?
What about job prospects in this new city if you plan on relocating? What will you do with your newly purchased home if you plan on travelling again in the future?
Most importantly, what about life beyond the pandemic?
Should I stay or should I go now?
While many of the answers to these questions may feel totally uncertain right now, and it may be fully daunting to think about a post-pandemic world, it certainly must be considered if one is to jump into the pool of homeownership.
Despite the new opportunities, such a decision can never be taken lightly and the points brought up here are just the tip of the iceberg when it comes to things to consider.
Are you planning on buying a house during the coronavirus pandemic? What important things have you had to consider? I'm happy to hear your comments below and you found this article helpful, please share it with others.