Friday, February 17, 2012

Fri Post #1: Do not ask for whom the bell tolls...


Yesterday we ruminated on the impact the plethora of mainstream media articles about the Canadian Housing Bubble was going to have on the real estate market.

How long before all the negative press convinces buyers (local and internationally) that now is NOT the time to buy?


In a note to clients, economists at TD said that a "housing correction will take hold in 2013." Prices are already down from their highs in May of 2011 and TD sees 2012 being a weak year... but the real 'correction' will start in 2013.

Ummm... okay.

So let me ask you a question.  If you are looking to buy, prices have been dropping lately, everyone and their dog is talking about housing bubble, listings are booming, sales are dropping... and TD Bank comes out and says the real 'correction' won't ramp up until 2013 - would you buy this year?

More importantly, if you are one of those 70% of Boomers who don't have adequate funds set aside for retirement and whose entire plan for your golden years is selling your bubble inflated real estate and downsizing in the next 5 years... do you hit the panic button yet?

Thirty-five years ago you bought that Richmond, Burnaby or even Vancouver house for $65,000.  It currently is valued at anywhere from $700,000 to $2,000,000... if local prices start to slide much more, do you undercut the market and still get out with a succulent profit (thereby creating even more downward pressure on prices) or do you stubbornly hold on because the house was valued at 15% more last May and it's "worth" at least that now?

2012 is shaping up to be a very interesting year.

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2 comments:

  1. AnonymousFebruary 17, 2012 at 5:07 PM

    I have a couple of friends with boomer parents looking to sell this spring and are in the exact scenario you describe; bought in the 70s for under $100k, no savings outside of the house, and think it's worth $1m. This is going to be very sad and very painful - for all of us.

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  2. GGFebruary 18, 2012 at 6:42 AM

    2013 is going to see maximum roll-overs of mortgages in Canada. TD knows this. What do they also know? Seems maybe they know interest rates will be higher by then, otherwise it wouldn't matter.

    Just a thought.

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