If you’re waiting for the bubble to burst….
The market is hot with prices continuing to climb and inventory slowing creeping up – but at a snails pace and not nearly enough to offset the demand. We see the climb and fears of a “correction” or bubble-burst with prices tumbling are the either the hopes of those that missed buying in or the guess based on old history ( the depression).
An article from Inman – Real Estate Trends Company:
Historically low inventory leading buyers to make rushed decisions. Bidding wars helping push up record high housing prices. Many in the nation’s largest homebuying generation are being priced out of markets nationwide. Are these the signs of a housing bubble?
It’s hard not to look at the unprecedented territory of the U.S. post-COVID housing market with a twinge of fear that the country is returning to conditions that existed before the collapse around the Great Recession. As common as the question is these days, economists say today’s market boils down to the simple economic principles of supply and demand.
BEHIND THE NEWS: There are a few things that make the market’s ongoing ramp up fundamentally different this time around. More recently, the market has been driven by much healthier, fixed-rate and 30-year mortgages that give owners certainty after buying. While that rate is rising and expected to keep climbing, it pales in comparison to the rates from 30 and 40 years ago. Lenders are also taking fewer risks when it comes to qualifying buyers. —Taylor Anderson
What to do…?
Lets take it one step further and say that the market drops 10%. The interest rates are now on the rise and the Bank of Canada expects that they will see 5 or 6 more increases this year and it will continue through 2023. A mortgage of $500,000 @ 3% = $2,630/m. That same payment with a 4% mortgage will cover a $450,000 mortgage. Add in that a 10% drop in values will trigger the banks to raise the rates faster and you will be paying more. Notwithstanding an outside force that isn’t planned (ie: war or other catastrophic event) the demand just won’t allow a drop in prices in this area and even if they did, the planned interest rate increase eats up any advantage.
By my calculations and the current trend line… it is still a good time to buy!
