Buy a Home or Rent - What is the Best Choice in Canada Today?

Interest rates are low, lowest ever, and the price of homes have dropped significantly but is this the best time to buy? Prices of homes have begun to recover and the mortgage interest rates have begun to climb. The question I am faced with is should I buy a home or should I rent for awhile first?

Considering the cheap cost of money and lower prices I'd say buying is the best option. But will it be for the next 5 years?

Interest rates can only go up and when that happens the cost of money goes up and the people jumping into the market will dwindle. As demand for homes goes down then the price of homes goes down. That said, the amount of new housing starts is at its lowest levels in years causing a future shortage in supply. With a shortage in supply the decrease in demand will balance out.

As interest rates increase and the cost of money goes up some people who maxed out their limits on buying a home will not be able to afford to make their payments. If they took a closed mortgage this will give the market 5 years until people start walking away from their homes. If they choose the variable then it may happen sooner.

Now if I factor in the cost of renting a home for a family of 4 in the lower mainland at $2400 a month it will cost me $28 800.00 to rent for a year. Even if we rented a smaller home at $1800.00 it would cost $21 600.00. The cost of borrowing at a higher rate next year plus the cost of renting for a year could offset any lower pricing if prices fall due to a higher interest rate.

Blogs that focus on the Real Estate Market or Economy:

America Canada Blog
Housing Analysis Blog
Alberta Bubble Blog
Alberta Real Estate Watch
Vancouver Real Estate Blog

These blogs should give you a lot to think about and look at.

As for my decision. I would prefer to buy then rent, I just want to be smart about it and only purchase that which we can afford over the long run. By using one income for mortgage approval I know that we will be able to afford future increases with two incomes. By paying off as much as possible while we have a lower interest rate will ensure that when we have higher rates the required payment won't jump too high.