Real Estate Owners, Mortgage Brokers and Home Buyers due for a “Reality Check”

Today I got this article come across my desk from the Financial Post talking about the “new reality” that everyone in the housing market will be facing in the near future. It is talking about the historical returns in the appreciation of real estate and how they are unsustainable, and gives some examples of people who have recently been burned by speculation in the real estate market.

While it sounds like doom and gloom by the heading and the beginning of the article, and most of these types of articles come out in a reaction to a housing downturn, the content of the article seems to be quite realistic.

The main thing that I agree with is that the market is not going to be destroyed in the years to come, but that it is going to be more “balanced” which means that there are not going to be as many buyers rushing to buy and that increases in housing prices will be more moderate.

It is also worthwhile to note, as a mortgage broker in the Vancouver area, that I have not been actively recommending property speculation in the Vancouver area despite historical increases in property values. As a mortgage broker, I look primarily at cashflow when giving my opinion on an investment property to a client. It is cashflow that you can take to a mortgage lender and finance. Negative cashflow situations make it difficult to maintain flexibility, and most of the properties in the Vancouver area will not cashflow. There are still many areas outside of the Greater Vancouver Area that I can finance great cashflowing properties in.

For those who are looking to buy and live in a home, I think it is still very worthwhile to buy, and it is still safe to do so. People who buy to live in a home will stay in their home for the longer term, and will likely realize appreciation in the value of their home, as well as have essentially a forced savings program via mortgage payments.

As I have also stated recently, it is my belief that the recent decrease in sales and property values in the Vancouver area as well as across Canada are market adjustments to stricter lending rules and the introduction of the HST and its mistaken negative impact on the real estate market. Notice in that article I said “market adjustment” and that article is from March. Well…here we are!

Lending and buying will increase and things will start to get more back to normal in September when the kids are back in school and the barbecue is packed up, even if it is not back to the levels as its been the past 5 years. I think this is a good thing, as I think the market as it has been was unsustainable. If it kept going like this, no one would be able to afford to buy a home in a few years.

If you are looking to take advantage of the quiet time this summer to get a great deal on a property, fill out the simple form below and I will be in touch with you shortly.

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