SPONSORED AD: Real Estate Fact vs. Fiction

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The Real Estate market is fluctuating, spurring interesting discussions and speculations as to what will happen next. The challenge in an overly active market is to analyze all the dynamics, separating facts from fiction. Everyone may have an opinion, but when a buyer is trying to make decisions that could affect their future, it is essential to weigh all the variables, whether they are financial or emotional. Let’s be very clear, no one has a crystal ball with all the answers, but we do have economic real estate history, which can help guide our decision-making.

• Fact: Houses are not “gold bricks.” There is no guarantee of future value when someone
  purchases a home. For example, did you know that the average price in the Hamilton-Burlington area fell every year between 1990 and 2000? That represents ten years of potential stress if you are over leveraged.
• Fact: The current market has been a strong “sellers’ market” because of the basic economics of “supply and demand.” Generally speaking, when the availability of listings is at a ratio of less than 3 to 1 (meaning there are less than three listings for every sale), prices are deemed to be more impacted by competition. This condition pushes up average cost, as we are currently experiencing. Data suggests the ratio between listings and sales is only slightly more than 1 to 1 based on the past five years. The average selling price has doubled as a result.
• Fact: We have started a demographic shift. For many decades, the Baby Boomers were the dominant demographic. However, CMHC recently identified that Millennials now outnumber the Baby Boomers in our area. What does this mean? Millennials are looking to settle down, buy a house, and start a family. Where will they buy if the Baby Boomers are staying in their homes? This scenario creates a log jam in the market, reducing supply. Many people have suggested that building more homes should be a priority to increase supply, but that takes time.
• Fact: Borrowing interest rates have been at record low rates for several years, which provided potential purchasers with greater price flexibility. However, it is important to proceed with caution – do not over-leverage your debt level because rates can go up. As a matter of fact, the Bank of Canada just increased the interest rate to cool the market. Interest rates are subject to many influences, and one should balance the risk of the increased rates against personal income stability. It was only in the ’80s when interest rates spiked to over 20%.

When considering purchasing your first home, you need to analyze all the facts and remember that a home is more than an investment. You are buying a home to enjoy, to live in, and above all, to be healthy and happy in. The home may go up in value, but there are no guarantees. If you would like a copy of up-to-date real estate statistics, please send me an email at Judy@judymarsales.com, and I will send them to you to enable your best-informed decision.