Can this ride continue?

Well as we near the end of May, it would appear there is no end in sight to the bidding wars, multiple offers and craziness in the real estate market.

I have been asked numerous times, do I see an end in sight?  Will this last?  What will happen IF ….

ALL of these are valid questions.  I too am asking myself, how long can this continue.  Homes are selling for record high prices.  Homes that last year in Pickering were 400 and 500 are now selling for up to 100K more.

Is it because the Toronto market with the double land transfer tax has forced people to come East to Pickering and Ajax and drive up the home prices? Possibly…. or is it that Pickering and Ajax home prices were the slowest to increase in the past years and now are playing catch up.  Maybe !

With interest rates at an all time low, I have wonder what would happen if the rates went up, even 2% over the next few years… could people afford to pay their mortgage if it doubled?   I don’t know, I guess it would depend on income, down payment and debt.   I just keep scratching my head on this one.

They say the rates are not going anywhere, anytime soon.  So can the prices keep continuing to escalate… at such a fast pace.   Some say they will.  Others are skeptical that this can last.  It definitely is a Sellers market here in GTA and Durham.

As long as the rates stay manageable and the market is strong with Buyers out in droves, things will continue to flourish.

If for some reason, the markets takes a small correction, all you have to do is ride it out.  It eventually rallies back… like it did in 1990… my fear is the people that cannot ride it out.  Then what?  Power of Sales will pop up more and more.  Let’s face it, if you bought with 5 or 10% down and prices take a dive, what equity do you have … unless you can “HOLD” for the time it takes to ride it out, many people will end up walking away… am I making sense?   Sometimes I think faster than I type.  LOL

Well just take this as a warning.  When buying or selling, hire a full time professional who knows the market and prices and will protect your interests. That is all that concerns me with my clients.   Yes, enjoy the new found money when selling at all time highs but remember you have to buy too and then the shoe is on the other foot.  So think it through and talk to your local Real Estate professional and figure out the best strategy for you.

Should you need direction or have questions about the market or neighbourhood sales, call me.  I am always thrilled to talk to real estate.

Have a super evening and enjoy the market everyone…may it long continue to thrive and prosper.

And for those sitting on the fence, remember this – never have I heard people lose money on real estate.  My parents paid 16K for their first home and it is worth about 800K… just be smart, maximize your equity and remember, you can’t live in a Mutual Fund !  LMAO

Cheers xo

WHY HOUSING MARKET WILL STAY STRONG

Why GTA Housing Market Will Stay Strong In 2013
Great article written by Mark Weisleder.  Had to share !!!   
By Mark Weisleder | Moneyville. ca
Many economists predicted a local real estate crash this year, with prices falling by up to 25 percent. I didn’t see that prediction coming true and it didn’t. Nor do I believe it will happen in 2013.
Here’s why:
  1. Homes are more affordable
    In 1990, the average GTA home cost half of what it does today. But interest rates were 12 percent for a five-year term at the time. So, if a two-bedroom condo cost $250,000 in 1990 and you had a 20-per-cent down payment, your monthly carrying costs, including interest, taxes and common expenses, were about $2,500. The average rental for a two-bedroom condo at the time was $1,100, according to the Housing New Canadians research group. So the economics of ownership made no sense.

    Today, even with a price of $500,000, if you have a 20-per-cent down payment, with current interest rates at 3 percent, the total monthly payment is what it was in 1990. It is still $2,500 per month, including common expenses and taxes. But in downtown Toronto, the average rent paid for a two-bedroom unit is now close to $2,500 per month.

    Most tenants who can afford $2,500 a month or more in rent can probably afford to buy a home now, if they have 10 percent down payment or more.
     

  2. The lesson from 2012
    Toronto Real Estate Board statistics up until Nov. 30 show 82,200 units had sold in the GTA so far this year. In 2011, it was 84,900, and in 2010 it was 81,900. The average price on Nov. 30 was 2 percent higher than a year ago. If anything, the market has remained very stable for the past three years.
     
  3. Impact of mortgage rule changes is minor 
    The mortgage rule changes imposed in early July lowered the amortization period to 25 years if you were putting less than 20 percent down and lowered the percentage of your income that could be used for borrowing from 44 percent to 39 percent. The result was that buyers who would have purchased in late summer or fall moved up their purchasing decision to the spring. By fall, this meant many would-be first-time buyers were looking to rent instead of buy. This contributed to low vacancy rates.
     
  4. 2013 will be fine 
    Despite the doom and gloom, Toronto condo rental vacancy rates are 1.7 percent. This means that for those people who cannot sell their condos, there are plenty of renters who can cover the monthly costs.
     
  5. Debt-to-income ratio not relevant
    As our American friends like to say, “That dog won’t hunt.” Every month we are told that because the ratio of household debt to household income continues to rise — and is now at 164 percent — there is a danger of a real estate collapse.

    What this really means is that the average Canadian household has an income of $100,000 and total debt of $164,000 (of which their real estate debt constitutes-two thirds). Again, as stated earlier, with interest rates at 3 percent, this is not a dangerous problem.

    If interest rates were 12 percent, as they were in 1990, or if all your debt was on your credit cards (with interest rates averaging 18 percent), then this would be a serious problem.

    Note to readers: Pay down or eliminate your credit card debt in 2013.

    Note to government: With mortgage interest rates at 3 percent, it is almost criminal for lenders to be able to charge 18 percent on consumer credit cards.
     

  6. Interest rates may not rise until 2015
    The U.S. Federal Reserve is now saying it won’t raise rates until 2015. Our rates can’t differ much from theirs without harming our economy with a strong dollar and slower growth.
These are all things to keep in mind in the coming year. Somebody has been predicting a Canadian real estate market collapse for the past 12 years. It hasn’t happened yet and won’t happen in 2013.

Less demand is better than a BUST !

“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust” says Canada’s finance minister on the country’s cooling housing market.

Canada’s finance minister is taking credit for the recent cooling in the hot housing market, saying a slowdown now is better than a crash later.

Full story :http://business.financialpost.com/2012/12/03/cooling-housing-market-shows-stricter-mortgage-rules-working-flaherty/

Stricter mortgage rules have softened the market but it also makes it a healthier market for sellers to list their homes in.   Less deals falling through because pre-approvals are being done prior to even working with a Realtor to make sure they can afford what they are looking.   This is great market to buy as well due to the low interest rates.  Think about it, why pay someone elses mortgage… get a downpayment together and get in the market as soon as you can.  Real estate is the best investment of your life.   Let me show you how.