A place to start

There are still starter homes out there for first-time homebuyers, but they’re not cheap

As the overheated Halifax home-buying market cools, do first-time homebuyers risk getting burned?

Even though prices surged earlier in the COVID-19 pandemic and interest rates have climbed, homes are out there for first-time buyers, says veteran mortgage broker Rod MacInnis. The hitch, he says, is most prospective buyers need to lower their expectations to find a place without getting in over their heads. 

“First-time homebuyers are going to have to reconcile that they’re not going to start off with the granite countertops or the prime neighbourhood they wanted,” he says. “You’re starting out. This is your first home. It’s not your forever home.” 

Five or so years ago, you could get a Halifax starter home for around $175,000. Now prices are closer to $350,000. And forget about finding something on the peninsula.

“It’s something out in Sackville, Dartmouth, Eastern Passage, but you can still get a nice semi-detached in that $350,000 range,” MacInnis says. “A lot of my clients bought five, six, seven years ago and now they’re doing a financial reset based on today’s market. Whether they’re upgrading or refinancing, that equity works for them.”

Halifax is still a bargain compared to markets like Ontario. Prices might retreat a bit here, but are more likely to keep heading up over the longer term, albeit not at the pace of the past few years. 

“Are people buying today going to lose?” says MacInnis “Not a chance, The buyers are still there, so I don’t see people buying today putting themselves at risk of losing any money.” 

After five-year fixed mortgage rates fell to an unprecedented low of 1.69 per cent during the pandemic, they’re back to a more normal five-per-cent range.

The increase is shutting out some buyers who fail to pass the higher lending “stress test” rates of close to seven per cent. 

But that should help tilt things in favour of the buyers that remain, with fewer of the frenzied bidding wars that saw homes snapped up in days at $100,000 or more over the asking price.

“What’s going on right now is not a bad thing,” says MacInnis. “The environment we were in was not healthy.” 

THEN & NOW

  • $175,000: Going rate for a Halifax starter home five years ago
  • $350,000: The cost of a Halifax starter home today

START SAVING

  • $25,000: Minimum down payment of 5%, plus another $7,500 in closing costs 
  • $1,950: Monthly payment, including $1,652 mortgage based on a 4.69% five-year fixed rate, plus estimated taxes and heat
  • $90,000: Combined household income needed, assuming a normal debt load such as a small car loan and student loan

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