|
Those of my
followers who took my advice (stay in your parent's basement,
save your money, and buy when everyone else is trying to sell) will
soon be able to crawl out of your parent's basement and buy a house.
We've been
in a "seller's market" since 1995. Whether it's a buyer's
or seller's market is determined by statistics. Those statistics
pointed to a strong sellers market for most of the last 16 years,
aside from the early 2009 market.
Those
statistics are currently (Is
it a Buyer's or Seller's Market?) describing a market that is
resiliently a Seller's market although not as robust a market as the
pre-recession Seller's market
If you
bought into the buy low/sell high philosophy of my website, you'll
know that the best time to buy is at the bottom of the market. I
can't tell you when that will be, but if you stick with me I will
tell you when we have passed it and when it is safe to buy (when
prices are on the way up, not farther down.)
Resale
values dropped over 30% in the GTA in the last housing crash. The
most credible housing numbers are produced by the Teranet/National
Bank Housing Index which is forecasting resale house prices/values in
the GTA will drop by 20% before the market returns to sustainable
levels. .
We
haven't seen that scenario play out, yet, because of two external influences:
A
- Artificially low mortgage rates; Banks normally sell bonds to
raise the cash that they give to us through mortgages. Given the
state of the banks when they almost collapsed, the banks would have
to offer 20% bonds to investors to get anyone to buy them. That would
have driven mortgage rates to a point where the foreclosure crisis
seen in the USA would have hit Canada. To avoid that, our Federal
Government has been giving the banks the money (at 0.25%) to give
back to us as 5% mortgages. The banks are not complaining.
B
- As I have been warning everyone (Who
Should Buy in 2010) if you buy a house with no money down, and
the value of the house doesn't go up, you can't afford to sell it and
pay off the mortgage.
80%
of the mortgages taken out in the 5 years before the 2008 economic
crisis hit, were between 0%-5% down. Most of those minimum-down
buyers are sitting in houses that would normally be cycling back onto
the market. They can't get enough for the house to pay off the
mortgage, the legal fees, the Realtors' fees and the land-transfer
taxes on the next house, so those houses are not for sale.
Added
to that, are the people who COULD sell their house, but aren't
because they think a recession is a bad time to sell.
Those
factors have created an artifical shortage of supply. Without those
influences, resale house values would be closer to the 30% losses
witnessed in the 1990's crash.
At
some point, even our government has to deal with its own debt. It
can't keep giving the banks free money (taken out of our pockets as
taxes.) At some point the banks have to go back to the bond market.
Nobody knows how that is going to affect mortgage interest rates, but
consider this; if the rates are 5% when the bank is backing them with
free money, how high will they go if the banks are paying 10% to get
their bonds sold?
If
you're a homeowner in Barrie, with at least 30% equity in your
house, there is no reason to lose sleep based on a few months'
statistics. If you're thinking it's a bad time to sell, you're
justified in thinking so, but you're wrong. If have a house to sell,
get it on the market NOW.
If
you're a buyer, but are holding off, be assured that the market is
not getting away from you. Resale prices are increasing modestly, but
not at the break-neck pace in the last decade. You can wait to buy,
or if you've prepared yourself as I advise (see Who
Should Buy in This Market?) you could be one of the buyers who
sees it as an opportunity, not as a threat. When you decide that it's
time for you to buy, call me and we'll go find you that bargain! |
