Up to date stats for June in Victoria from Tim Ayres on Twitter:
New sales - 433
New listings - 710 (sales to new listings ratio is 61%)
Total active listings - 3773 (sales to active listings is 11%)
I'm seeing chatter all over the place of multiple offer scenarios and price gains. The market is once again in full frenzy at the low end (did it ever stop?) and first time buyers are drunk on cheap money and the prospect of pre-approval time limits ending. I don't think this will end anytime soon and we may see a record summer for sales volume (prices may peak above April 2008 too).
So, you're sitting on a 5% down payment for a $400K house. There's currently around 71 houses for sale priced below $425K within the CRD. Pickings are slim, you've got a down payment burning a hole in your pocket, a pre-approval time limit weighing on your mind, and the feeding frenzy atmosphere at every open house you attend. What's a savvy buyer to do?
If you haven't already, perhaps you should start acting like you've already bought? That means start saving the difference between owning and renting right now, every month. Here's a quick, back of the envelope calculation for you:
(Mortgage payment amount - current rent) + property tax amount + utility payments + house insurance payments + estimated maintenance costs = ($1800 - $900) + $125 + $200 + $85 + $200 = $1510.
You've got a $20,000 down payment, and you're adding $1510 to it every month. In 3 month's time, you'll have almost $25K to put down. If you keep this up for 6 months, that will grow to almost $30K. Should you wait a year, you'll have a 10% down payment, not a 5%, should you still buy a house for $400K. You will also have a very real understanding of the true costs of owning a $400K house in this city.
There is a time value of money calculation that needs to be worked out here. You need to sort out whether your money is better served in a cash savings account/money market fund (where else are you holding your down payments?) or actually spent on real estate. Considerations include mortgage interest rates (are they headed up or down in the next year?), interest account rates (what's the best you can get?) and the future value of the house (will prices be the same, more or less, in a year?).
Here's my personal assumption: mortgage interest rates will be higher, likely by 1% on a 5 year term; home prices will be the same or less than May median price of $525,000 (but the low-end will be the same regardless). Here's the scenario crudely:
Mortgage amount: $380K
Interest rate: 4.5% (5 year term)
Monthly payment: $1788
Principle paid in 12 months: $4615
Interest paid over the term of the mortgage: $82,044
Mortgage balance at term end: $354,728
Interest paid over the remainder of the mortgage (after the first 5 years): $338,846 (assumed 25 years, 6.2% avg interest rate)
Total mortgage interest (est.): $420,890
Buy in one year
Mortgage amount: $360K
Interest rate: 5.5% (5 year term)
Monthly payment: $1918
Interest paid over the term of the mortgage: $95,365
Mortgage balance at term end: $340,245
Interest paid over the remainder of the mortgage (after the first 5 years): $325,012 (assumed 25 years, 6.2% avg interest rate)
Total mortgage interest (est.): $420,377