The article insightfully notes that the main trouble with real estate is that while prices are rising, incomes are not.
And the main culprit for this imbalance is that rock-bottom borrowing costs continue to lure buyers, and investors are rushing in — despite a shortage of listings — for fear that if they don't get into the market now, they'll miss their chance.
And what are the dire concerns/consequences?
From the article:
- "It's absolutely not debatable that housing prices cannot rise faster than incomes over the long term," said Will Strange, professor of real estate and urban economics at the Rotman School of Management. "Sooner or later, incomes have to rise, or home prices fall, for balance to be attained."
- "If I didn't personally have most of my wealth tied up in housing, this would not be the time that I would choose to jump in," Strange cautioned.
- "At the same time, interest rates have nowhere to go but up, which could leave some buyers in a position similar to U.S. homeowners, who had houses worth less than their mortgages after the subprime bubble burst and prices crashed."
- "We're certainly urging people to error on the side of caution," said Bruce Cran, president of the Consumers' Association of Canada. "If you're paying an amount of money, whatever that might be, that you couldn't sustain if interest rates rose by say 25 or 30 per cent — I can see that being a problem for a lot of people."
- "Don't buy [a house] because you think the price is going to go up."
Couldn't have said it better myself.
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