Home appraisals in the last few weeks suggest a new trend in real estate in Simcoe County – the value of home prices in our area is on the decline, with the average home appraisal coming in 10 percent lower. This news will have a definite impact on home sales moving forward in 2018. Although many finance experts predicted that housing prices would decrease by about 5 to 10 percent in the wake of the new Jan. 1st mortgage regulations, the quick reduction is somewhat surprising. Here’s the good (and not so good) news about declining home values in Barrie and surrounding areas.
Good News: It’s a buyers’ market
Falling home prices are always good news for those looking to buy, particularly for first time home buyers. With our region stuck in a ‘sellers market’ for so long, the transition to a ‘buyers market’ is a welcome change for many. Not only does it mean that more home buyers will be able to make their grand entrance into the real estate market, it also means that more families will be able to afford a home that fits their needs. Some of the exorbitant prices that we experienced last year kept potential buyers out of the market altogether. Now that prices are lowering, it will help boost our local economy and keep the housing market moving.
Good News: Lower home values will counteract mortgage stress-test effects
Lower home values will also help counteract the effects of the new mortgage stress test regulations that came into effect January 1st. In accordance with these new regulations, Canadians now have to prove that they can qualify for a mortgage rate that is 2 percentage points higher than the rate they are offered, reducing home buying power by an estimated 21 percent. Falling home prices will, therefore, help to boost buying power back up a little for many families, allowing them more options that fit into their price range, therefore helping them to ‘pass the test’.
Not So Good News: Less equity in your home for refinancing
And now for the not so good news – while decreased values are great news for first time home buyers and will lessen the negative effects of the new mortgage stress test, falling home prices are not ideal for current homeowners. A decrease in property value also means a decrease in the equity you have in your home. Your LTV or loan-to-value ratio will also change as the value of your home decreases. As a result, if you’re thinking of refinancing your home, you not only have less equity to work with, it also may not be a simple process, depending on your LTV.
Not so Good News: Sellers beware
This one is fairly obvious, but if you’re trying to sell your home and had your heart set on the higher prices we experienced last year, you’ll be a little disappointed that you may be getting up to 10 percent less than anticipated. Don’t despair – we all know this housing market is unpredictable and we just can’t say what will happen in months to come.
Decreasing home values in Simcoe County may be good or bad news for you and your family – depending on your circumstances. Whatever the case may be, I can help you navigate falling home prices, mortgage stress tests, as well as help you figure out your best plan of action. To learn more about the best personal finance and mortgage solutions available to you, contact me via email or phone at 705-315-0516 to set up an appointment.