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Question for realtors

munmun

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Hello. I am a potential first time buyer. I am aiming to buy ahead of the new mortgage restrictions. I probably will never be able to buy again if I wait. I believe that real estate is the most sound investment one can ever make. Prices have not gone down and never will. Canada is very different to the US and the rest of the world. We have sound banking and lending compared to them. Urban space is limited. Immigration is huge. The Chinese are buying in. Affordability is at a great place. The consumer is financially healthy and the economy will grow. So I have made my decision to invest my minimal savings into real estate with a 35 year amortization before the rules change. I will ride this investment and bank on it for retirement.

However I am getting confused by some advertising I am seeing from realtors. For example one in my area has put out an ad saying that it is a great time to buy (given mortgage rule changes) and a great time to sell (because prices will fall after rule changes). While I strongly disagree with her comment about prices ever decreasing I dont understand the logic around why it would be a good time for me to buy now if prices might decline in the future (even if I only get a 30 year amortization).

Can someone help? Am I missing something?
 

Willy Wong

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munmun,

I don't think anyone has a definitive answer or a crystal ball to forecast what will happen over the next 12 or even 24 months in the real estate market. All we can do is look back at historical data, interest rates and come to sort of conclusion or forecast if you would....

The recent lending rules changes are minor, but will have a affect on what you can borrow after March 18, 2011. So is it a good time to buy? Well, it depends on the individual, their financial circumstances and the size of the mortgage the buyer is seeking. You can borrow more today based on current lending practices and less after March 18, 2011. So perhaps it is a good time to buy. It all depends on your need.

Is it a great time to sell? Based on data, IMHO, yes. The market is healthy despite the sales numbers. If the house shows well, in desirable location, and priced right it will sell.

Real estate is pretty sound investment IMHO, there maybe downturns, but it always manages to find a way to bounce back.

Good luck with your decision and if you need more help, drop me a line.
 

restate

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Regardless of property price rise or fall, pls note also the most important thing is, this is not the stock market where transactions now even occur with the rise and fall in the seconds/minutes and make profits, real estate is a long time kind of investment where you are also 'living and enjoying' a private space you own that has a intangible value!
 

Ric

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I personally think the best time to buy cannot possible be the best time to sell. As Willy said, it all depends on your circumstance. Having a 35yr amortization as oppose to a 30-yr means you can now buy (for example) a 550K home instead of 500K. But what will happen after March 18? The amount of people that can purchase that 550K house will be reduced. That seller now has three choices 1. Hold out for a more affluent buyer at $550K 2. Drop the price to $500K to attract the buyer who can now only afford this amount or 3. Take the house off the market.

When the government increased CMHC insured mortgages amortization from 25 yrs to 35 and then 40yrs a few years ago (to allow more marginal buyers to fulfill their home ownership dream); what they did not forecast is an equivalent run up in prices to directly reflect peoples new affordability. I therefore would expect that prices will have to come down to reflect a shortening of mortgage amortization (afterall, shouldn't the reverse be also true?).

So, what’s more important to you? To qualify for a more expensive house before March 18 and have 35-yrs to pay more interest or to wait until after March 18, prices may fall to reflect the new affordability picture and you now have 30 yrs to pay for a cheaper house with less interest cost. To me the choice is clear..but then again people don’t always see things my way.. have fun shopping.
 
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cdr108

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I personally think the best time to buy cannot possible be the best time to sell. As Willy said, it all depends on your circumstance. Having a 35yr amortization as oppose to a 30-yr means you can now buy a 550K home instead of 500K. But what will happen after March 18? The amount of people that can purchase that 550K house will be reduced. That seller now has three choices 1. Hold out for a more affluent buyer at $550K. Drop the price to $500K to attract the buyer who can now only afford this amount or 3. Take the house off the market.

When the government increased CMHC insured mortgages amortization from 25 yrs to 35 and then 40yrs a few years ago to allow more marginal buyers to fulfill their home ownership dream; what they did not forecast is an equivalent run up in prices to directly reflect peoples new affordability. I therefore would expect that prices will have to come down to reflect a shortening of mortgage amortization.

So, what’s more important to you? To qualify for a more expensive house before March 18 and have 35-yrs to pay more interest or to wait until after March 18, prices may fail to reflect the new affordability picture and you now have 30 yrs to pay for a cheaper house and less interest. To me the choice is clear..but then again people don’t always see things my way.. have fun shopping.



Ric, i can always rely on you to be a honest straight forward realtor, without using double talk and preaching the RE mantra that it's always a good time to buy and RE always goes up.

you're one of the very few who've voiced that current prices don't make financial sense as an investment cashflow wise, and i applaud you for that.
 

Ric

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Ric, i can always rely on you to be a honest straight forward realtor, without using double talk and preaching the RE mantra that it's always a good time to buy and RE always goes up.

you're one of the very few who've voiced that current prices don't make financial sense as an investment cashflow wise, and i applaud you for that.

Thanks Cdr, I appreciate that. It's nice to not be bashed for a change...:)
 

SYRealtor

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Hello. I am a potential first time buyer. I am aiming to buy ahead of the new mortgage restrictions. I probably will never be able to buy again if I wait. I believe that real estate is the most sound investment one can ever make. Prices have not gone down and never will. Canada is very different to the US and the rest of the world. We have sound banking and lending compared to them. Urban space is limited. Immigration is huge. The Chinese are buying in. Affordability is at a great place. The consumer is financially healthy and the economy will grow. So I have made my decision to invest my minimal savings into real estate with a 35 year amortization before the rules change. I will ride this investment and bank on it for retirement.

However I am getting confused by some advertising I am seeing from realtors. For example one in my area has put out an ad saying that it is a great time to buy (given mortgage rule changes) and a great time to sell (because prices will fall after rule changes). While I strongly disagree with her comment about prices ever decreasing I dont understand the logic around why it would be a good time for me to buy now if prices might decline in the future (even if I only get a 30 year amortization).

Can someone help? Am I missing something?

So did you end up buying? You never updated us.
 

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