A new year is upon us. The market is changing. Here are some things to think about if you are considering selling your home.
REAL ESTATE ALERT
As the world economies continue to pull out of recession, industry experts predict downward pressure on real estate prices for many reasons.
- Interest rates are at all time record lows and have only one direction to go, up. Interest rates are predicted to rise later this year and into next year which will have a negative impact on mortgage affordability.
- Governments tend to increase rates when annual inflation exceeds 2%. Major economies all over the world have recently increased their Use Tax (example UK 17-20%, Ontario HST) which increases inflation and decreases disposable income.
- All levels of government (city, state, provincial, federal) in the US, Europe, Canada, Japan and more, have record debt levels like never before. To finance these debts governments must buy bonds at increasingly higher interest rates which put upward pressure on bank lending rates.
- January 1, 2011 marks the first year baby boomers have reached the retirement age of 65 years old. Most boomers wealth is tied up in the equity of their home. It is predicted that they will need to access this equity to supplement their retirement income. This will increase the supply of homes for sale and ultimately put downward pressure on prices.
- Government and company pensions are acknowledged as underfunded; we continue to pay more for fewer benefits that put more pressure on disposable income.
- Inflation and our cost of living is predicted to increase because of higher commodity prices for oil and fertilizer. A weakening US dollar from their huge debt is pushing up commodity prices, and booming economies such as China, India, and Brazil are demanding more commodities, pushing up prices as well. Oil is the base for most rubber/plastic products used today and fertilizer is required to grow the food we eat; leaving us with less disposable income.
The average house price in the GTA is approximately $430,000. A market correction of 10% equates to $43,000.00 or approximately $86,000.00 of pre-tax family income; an entire years earnings for many families that they cannot afford to lose. Can you?
Our February newsletter will include a detailed snapshot of your neighbourhood real estate sales activity during the last 6 months ending January 31, 2011.
Strategic right-sizing and/or moving to less expensive (or more expensive) neighbourhoods are popular choices for many people today when planning the next stage of their life.
Let me know if you would like a complimentary information session to help you make a more informed decision regarding the sale of your home.
I trust this was informative.