We have come out of a period of unequaled growth. Over thepast few years we have seen real estate values increase dramatically - in manycases in excess of 100%. Last year you could list your home, receive multipleoffers and accept one at more than the list price. As with all markets anadjustment was due. We are now in a period where there are more homes listedfor sale than there are buyers. The supply and demand principle says thatprices will moderate as those that have to sell must lower their price toattract buyers. This means bargains will be available for the astute investor.
It is important to note that the bottom hasn’t fallen outof the market and it won’t. This is a normal market reaction that has happenedmany times in the past and will do so in the future. These fluctuations provideopportunities for those with the ability to purchase to get tremendousbargains. Wise people make their fortunes during times similar to these. They buy when others are sellingand sell when others buy. If you haveequity in your home you can be one of these wise folks.
Interest rates are at all time lows which means a buyercan purchase a home at a lower price than was available a year ago and finance it with lower interest rates.That being said, times are uncertain and you will have to keep a close eye onfuture rate trends as we may see rateincreases sometime next year. Remember, rates have a lot more room to move onthe upside than they have on the downside. If you have a variable rate mortgageyou may want to lock it in during the coming year. If you are looking to buy you may want toconsider taking a fixed rate for stability.
I like to tell my clients that there is no bad time to buyreal estate – but some times are better than others. This is one of thosetimes. Real estate should not be looked at as a short term investment butrather should be maintained over at least a five to ten year period. Ichallenge you to find any time in the past where real estate was worth less atany point ten years after a specific date. You may find the very odd time wherethis occurs after five years but not ten. We all look back with envy at a timewhen our parents bought their homes for what now seem ridiculously low prices.But remember that at that time they probably thought they were paying too muchand wondered how they were ever going to afford it.
People’s net worth, or lack thereof, is predicated onwhether they bought real estate at some time. It doesn’t matter much when theybought, only that they did buy. Periodically I see clients who are in their50’s and 60’s who have never owned a home. Invariably they have virtuallynothing. No savings, no investments. In short they have little or no net worth.Fortunately these are few and far between.
We can sit back and lament the fact that our home is wortha bit less than it was last year or we can look at it as a great opportunity.It only matters if you are looking to get out of the market completely which isunusual. If you are looking to sell and buy something else it is all relative.If your home’s value is lower, so is the home you are looking to buy. If youare looking to take equity out of your home to pay off other higher rate debtnow is the time to do it. Although your equity position may be lower, it maystill be enough to allow you to get your finances in order or to obtain thefunds to invest. Another great opportunity may be available by using yourequity to invest in RRSP’s this spring. With the stock markets down thereshould be many bargains to be had. Consider using your home’s equity to top up your RRSP and enjoy theresulting tax saving. Most people have many thousands of dollars available inunused RRSP deposits from prior years.
Let’s be positive about our future and take advantage ofthe opportunities available now. As always I am here to help you, your friendsand family. Feel free to call me anytime or pass my name on to others. I trulyappreciate your business and referrals which form the basis of my business.
Keith Allan
250-374-3010
kallan@mortgagealliance.com