Not what buyers are wanting to hear from the news experts and economists, however it seems like every step that the government takes to curb the housing bubble, something happens to keep driving the price if not up, but stable. Last July, CMHC announced new mortgage insurance rules, they would not allow 30 year mortgages as well as require a better debt to income ratio for borrowers. This year, CMHC is limited to how much it can lend because their budget is tightening. All these factors lead to costs going up for purchasers.
Investors are also eager to get out of the market. As soon as they are able to recoup enough positive equity in their home, they are selling out. Mostly because they are having trouble making mortgage payments when market rent is lower than a market value mortgage payment.
Is that a bad thing? Well it depends on what you want to do in the market. Are you looking to flip and make some money? you could be ok, but if you are eager to buy at the moment, you may be hoping the price goes up, while much larger forces try to drive the price down.
Who can benefit the most? Homeowners with a second property. Since you need to live somewhere, it doesn't make sense to sell your home only to go and rent unless your were absoluteley convinced of a market crash. If you do not have a mortgage with the clause "full amount payable upon sale" or you have no mortgage at all, you can owner finance or "wrap" the mortgage.
How wrapping and owner financing helps is you continually receive the monthly amount of what the value is today. If the market goes down, you are still selling the property, at interest, at todays price. The money can then be used to purchase a property when the market has dropped. For example, let's say you have a 1,000 square foot condo and it sells for 300k, the private mortgage over 30 years at 5% could bring in $1,745 per month. All else equal, with terms interest and other variables except the purchase price, let's say you purchased your neighbors identical condo for 240k, you would pay the new $1,396 paymentm but now you have 349 per month passive cash flow. Added to a tenancy in the new property, you could have 25% of your monthly payment paid for. (or 8 years sooner if added to the mortgage)
For more information on making the best of a bust or slow market, call or text me today.
For the video on the Sun's pessimistic outlook on Canadian home prices, click below