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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 13 years, but
showed signs of a softening market in 2007.
Those
statistics are currently (Is
it a Buyer's or Seller's Market?) describing a market on the
tipping point. In the first quarter of 2009, we slipped into a
buyer's market. February looked like the bubble had finally burst.
March and April bucked the trend though, and where the market goes
next is dependent on how the market reacts to whatever economic news
hits next.
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 begins to recover.
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 mortgage taken out in the 5 years before the economic crisis
hit, were between 0%-5% down. House values have not moved in two
years. 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 and the
Realtors' fees, 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.
In
July of this year, a new 8% provicial sales tax will be slapped on
new home sales. That will kill the housing industry (which drives the
Ontario economy) and send swarms of former new-home purchasers into
the resale market and further exacerbate the shortage. Resale values
should rise.
At
the same time, there is a bill before Parliament, (or was before
Dictator Harper prorogued Parliament for the secod time,) to raise
the minimum downpayment a buyer must have to get a mortgage. It's
currently 5% (after briefly being zero) and would likely be raised to
10%. That's a refreshing development when you consider how the banks
profit from Canadians being slaves to our debt, but in the short-term
that will have a detrimental affect on the resale housing market. If
it happens.
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 at the end of 2009 haven't
changed from 2008's levels. You can wait to buy, or if you've
prepared yourself as I advise (see Who
Should Buy in 2010?) 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! |
