You see it splashed in the headlines almost every day, the constant references to Canada's red hot housing market and homes selling for crazy amounts over asking price are enough to make even the most wealthy buyer consider sitting it out. What on earth does it all mean? Click here to read more.
What is going on in the market?
There are a number of factors influencing the current real estate boom;
- Our economy was very strong going into the pandemic and has shown surprising resilience, recent GDP numbers show levels almost as high as pre-pandemic...without the contribution of the airline, hospitality and travel/tourism sectors!
- Whether through huge stock market gains, Bitcoin windfalls, Government relief or simply savings due to reduced lifestyle, there is an enormous amount of money in our system right now, leading more people to want to purchase a first home or move up.
- Our interest rates remain enticingly low, it costs almost nothing to borrow money right now, it is a great time to leverage that into a hard asset like a home.
On top of that, despite the fact we are all pandemic weary, people remain positive that the future looks bright and they feel confident about purchasing.
So people have money and are confident but there is almost nowhere to spend it; the inventory of available homes has been insufficient for years. We all learned the law of supply and demand in high school...the lower the inventory the higher the prices. Increased lifespan and health lead people to stay in their homes longer, increased construction costs leading to fewer homes being built, increased immigration means more people are competing for fewer resources and on top of that, Covid fears are keeping more people from selling their homes.
When will the craziness end?
Most probably it will take a major financial event to shake the market or a significant increase in interest rates before things start slowing down. As the economy roars back to life post-vaccination, and people run out to spend their accumulated dollars, inflation will most likely start creeping in. The Bank of Canada keeps a lid on inflation by trimming or increasing interest rates, but a certain amount of inflation is good for our government, it lowers the relative burden of the debt they carry. So you will see your cost of living go up before you see the BoC raise the prime lending rate, and neither of those will happen in the short term. The general consensus I have been seeing via financial analysts from the Big 5 is that nothing will change until we near the end of 2021, and even then it will be more of a plateau than a drop. So no big real estate bust in the short term.
Is this the time to buy?
In the grand scheme of things, however, our personal homes are not investment vehicles. They are definitely a great opportunity for forced savings, and their value increases over time, so the end result is usually a windfall when you sell. So buying still makes sense. You may have to take your time, you may not find the right place as quickly as you want, you may have to offer more than you want, but there is a home out there for you. Line up your ducks, find the right professionals (banker, inspector, contractor, realtor, notary) to support you in the process, and get out there and start looking. Try not to get emotionally attached to the result, you may have many nos before you hit a yes. Save your money to increase your down payment or to pay for updates, learn to live on the budget you will have once you are in the new home. The saying "when the student is ready the teacher will appear" also applies to buying property...when you have prepared and are really ready, you will feel confident about making the jump.
And if you are on the other side of this equation...you have a home you are thinking of selling? Please call me, I will walk you through the process so you know what to expect, and THEN you can make your decision about what to do!
Warm regards to all,