Is it a good time to buy a home in a declining market?

The answer is maybe. It depends on your individual circumstances. If you're in a position to buy now, there are some advantages to doing so.


You’ve done your research. You know what you can afford and you’ve been scouring listings for months, but you just can’t find the perfect home. You’re getting frustrated and you’re starting to wonder if maybe you should wait until the market improves. After all, isn’t it a bad idea to buy a home in a declining market?

The answer is maybe. It depends on your individual circumstances. If you’re in a position to buy now, there are some advantages to doing so.

Advantages to buying in a declining market

  1. Lower Prices. The most obvious advantage of buying in a declining market is that prices are lower than they were previously. This means that you’ll be able to get more home for your money. Prices have fallen as much as 20% in some segments of the market such as single family detached between $1.2 and $1.5M.
  2. More negotiation power. In a buyers’ market, sellers are more likely to be open to negotiation because they know that there are fewer buyers competing for their home. This gives you more bargaining power when it comes to price and terms.
  3. More inventory to choose from. Because there are more homes on the market in a buyers’ market, you’ll have more options to choose from. This means that you’re more likely to find the perfect home at the right price.
  4. More flexible sellers. Like we said before, sellers in a buyers’ market are often more willing to negotiate on price and terms. They may also be more flexible on things like closing date and repairs that need to be made before closing.
  5. Interest rates are still low. Mortgage interest rates have been rising slowly over the past few years but they’re still relatively low compared to historical norms. A 4.00 to 5.00% rate is still historically pretty attractive. This means that now is still a good time to lock in a low rate on your mortgage.
  6. It’s a good time to invest. If you’re looking at buying as an investment, then a declining market may actually be a good thing for you. That’s because when prices start to rebound, your investment will go up in value faster than if you had bought during an upswing in the market.
  7. You may be able to get government assistance. If you’re a first-time homebuyer, you may be eligible for government programs and incentives that can help with things like your down payment or closing costs. Check out the Property Transfer Tax exemption, and the Federal Governments first time home-buyer incentive program.
  8. Be greedy when others are fearful. A retreat in housing prices is simply not a very common occurrence on a national scale. This is one of the rare opportunities in our lifetime to buy assets at lower prices. Don’t try to time hitting the bottom, you can’t.

Disadvantages to buying in a declining market

  1. It could take longer to seller your current home.If you need to sell your home before prices rebound, it could take longer than usual since there will be more homes on the market competing for buyers’ attention.
  2. You could end up owing more than the house is worth. If prices continue to rapidly decline after you purchase your home, you could end up owing more on your mortgage than the house is actually worth—a situation known as being “underwater.” This can make it difficult (or even impossible) to sell without taking a loss or being forced into foreclosure if you can’t make your payments.
  3. It could be harder to get financing. In addition to having stricter lending requirements in general, some lenders may be hesitant to lend money for a purchase in a declining market since there’s always the risk that the property could lose value and leave them with no equity.
  4. It could be stressful. Buying any property is stressful but add into the mix the uncertainty of a declining housing market and it’s enough to make anyone break out into sweats.

Ultimately, the best thing to do is to speak with a local real estate agent or finance professional to get their advice based on your individual circumstances before making a decision one way or another.


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