Wait for a Price Correction, or Buy Now?

The results from many polls reveal many people feel they should wait for a real estate price correction before they buy. While I can’t fault them on waiting, I always raise a note of caution that it’s exceptionally difficult for anyone to time the market. A quick look at the history of price corrections in Greater Victoria using prices adjusted to 2018 dollars demonstrates why.

In 1994, the people who said, “let’s wait on the sidelines for a price correction” were right for about a year and a half while we saw single detached home prices drop 12 per cent until 1996. However, if they kept waiting because they were hoping for an even larger dip, they waited in vain for the next six years while prices essentially flat lined. In 2002, prices exploded and rose an astonishing 105 per cent. Few saw it coming. Anyone who wasn’t already in the market missed out on the massive surge in appreciation.

In 2011, those who said “wait for a price drop” were correct while prices dropped 10 per cent. But those waiting after 2014 were disappointed as prices once again took off rising 40 per cent.

The problem with waiting on the sidelines for a price correction is, no one knows what housing prices will do in the short term. I encourage my clients to keep in mind what home prices have done over the last 55 years; a steady rise in average value from $80,000 to over $900,000 (in 2018 dollars). Instead of being concerned about timing the market, it’s better to buy when you are qualified, financially capable, and ready to take on a first or new home. Your finances are within your control.
The housing market is not. (Graph courtesy of House Hunt Victoria).