Builders are building cheaper condos, apartments and townhomes because that’s what the market is demanding. Solid well-built homes are no longer fashionable as buyers now desire homes made out of cardboard and duct tape. New material technology makes the leaky condo crisis a thing of the past as new homes can simply be wrung out by hand if they become too moist.
“Canada’s construction boom continued in July, but Canada Mortgage and Housing Corp. says it is seeing a swing away from single-family units towards cheaper condominiums, townhouses and apartments.”
Is that evidence of increased demand for this kind of dwelling or are the limits of affordability being reached? Ah! Here it we are, its a ‘growing interest in less expensive dwellings’:
“Strong multiple starts reflect a growing interest in relatively less expensive dwellings,” said Bob Dugan, chief economist at CMHC’s market analysis centre.
Single-family homes have been trending down for several months, reaching their lowest level of the year in July. It is a trend that Dugan expects will continue for the remainder of the year.
“Rising prices and slightly higher mortgage rates are expected to soften the demand for new homes in the second half of 2006,â€ he said.”
article on CBC
I think there is a tendancy among people looking to buy in a booming real estate market to think that people who bought several years ago have it easy. If you are out house-hunting, looking at the way prices have risen dramatically over the last couple of years, you probably have a couple of worries: What if I don’t buy and prices keep going up until I can’t afford to buy anything? Or the flip side: What if I buy and prices drop wiping out my downpayment or interest rates go up and I can’t afford my mortgage?
These are all valid concerns, but what about current owners? Owning real estate in vancouver is not the panacea that some might think, and some of the same concerns affect the comfort and security of people who bought years ago. If you own and prices are high your money is only paper-wealth. Until you sell and actually capture that money it merely means that your property taxes are higher. I suppose it also means that you can take out multiple mortgages based on the paper value of your property, but that’s just more debt, not more money.
So what do you do as an owner after seeing prices rise like they have? If you sell and grab the cash what do you do with it? Buying another home in Vancouver just means you’re buying at current values, which doesn’t add anything to your bottom line. With the high Canadian dollar and market starting to falter in the US it might be a good time to think about investing there, but do you really want to move? Do you rent and wait to see if prices drop or level off?
Either way it’s a gamble. Bubbly real estate markets can be emotional rollercoaster for owners as well as sellers and buyers. What does the future hold? We’ll just have to wait and see.
Gee whiz! Newsweek just can’t stop stomping all over the US market. Here’s another article filled with gloom and doom about the real estate market there, seems like they’re printing one or two a day now:
..those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regionsâ€”existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as wellâ€”there are growing fears of a looming crisis.
Aren’t you glad it can’t happen here? At least we don’t have the ridiculous volume of ‘creative’ mortgages. I do wonder though – is what’s happening south of the border going to have a tightening effect on the availability of credit here?
There’s an interesting Newsweek article on MSNBC.com about the growing debt problem in the USA. In 1952 the average debt to income ratio was under 40%. Now its 126%. In BC we spend an average of $1.07 for every dollar earned.
So is this really a problem?
I don’t know because I have discovered the power of ignorance. Though I am occasionally bothered by doubts, I am embracing my inner ignoramus and plowing head-first into the future. What’s my secret? I have fashioned a sturdy hat out of these shoe boxes.
I highly recommend it.
So maybe you’ve seen the news on TV or in the newspapers – The numbers are out and this July saw a big drop in home sales – it was lower number of homes sold in vancouver than in any july in the last five years. This can be a troubling sign for those thinking of buying into the vancouver market, particularly in the condo market where some ‘experts’ claim that townhomes and condos are overpriced and due for a ‘correction’, or that vancouver real estate is in a bubble and we’ve reached the top of the market.
But look at it this way:
There has never been a better time to buy real estate in vancouver.
How can I say that? Does that mean I think that prices will keep going up and up after this pause? Do I have some inside information indicating that july is an abberation and the market will recover and prices will start rising again? No. By all indications it looks like current valuations are at their peak for some time and rising interest rates or any other economic hickups could result in price drops, particularly in the condo market. So how can I say that its a good time to buy?
Simple. It’s all about value. Condo’s in Vancouver have never drawn a higher price than they do right now, and as anyone with even the most rudimentery economics education knows things with the highest prices have the highest value.
What does this mean for you? If you buy now, you are likely to find a 800 sq ft condo in vancouver for around $500k. This same condo may have been priced as low as half that price just 3 or 4 years ago. If prices drop in the future, that means the value of the condo has dropped, and which would you rather have: a $500k condo or a $250k condo? A home is not just an investment- it’s a statement on who you are and if you’re the kind of person that wants a highly-valued condo then NOW is the absolute best time to buy real estate in the lower mainland!