Can prices continue to climb?

In the Greater Toronto Area (GTA) real estate market, it would appear there is no end in sight to the bidding wars, multiple offers and craziness. I have been asked numerous times, do I see an end in sight? Will this last? What will happen if…

All of these are valid questions. I too am asking myself, how long can this continue? Homes are selling for record high prices. Homes that last year in Pickering were $400,000 and $500,000 are now selling for up to $100,000 more than before.

Is it because the GTA real estate market with the double land transfer tax has forced people to come east to Pickering and Ajax and drive up the home prices? Possibly. Or is it that Pickering and Ajax home prices were the slowest to increase in the past years and now are playing catch up? Maybe.

With interest rates at an all-time low, I have to wonder what would happen if the rates went up, even two per cent over the next few years. Could people afford to pay their mortgage if it doubled?  I don’t know, I guess it would depend on income, down payment and debt. I just keep scratching my head on this one.

They say the rates are not going anywhere, anytime soon. So can the prices keep continuing to escalate at such a fast pace? Some say they will. Others are skeptical that this can last. It definitely is a sellers market here in the GTA.

As long as the rates stay manageable and the market is strong with buyers out in droves, things will continue to flourish.

If for some reason, the market takes a small correction, all you have to do is ride it out. It eventually rallies back, like it did in 1990. My fear is the people who cannot ride it out. Then what? Power of Sales will pop up more and more. Let’s face it, if you bought with five or 10 per cent down and prices take a dive, what equity do you have. Unless you can hold for the time it takes to ride it out, many people will end up walking away.

I tell my clients to just take this as a warning. I tell them that when buying or selling, they should hire a full-time professional who knows the market and prices and will protect their interests. Yes, enjoy the new-found money when selling at all-time highs but remember, you have to buy too and then the shoe is on the other foot. So think it through and figure out the best strategy for you.

Have a super summer and enjoy the market everyone. May it long continue to thrive and prosper.

For those clients sitting on the fence, I tell them to remember this: I have never heard of people losing money on real estate. My parents paid 28K for their first home and it is worth about 600K now. Just be smart, maximize your equity and remember, you can’t live in a mutual fund!

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Roger Townsend

Roger Townsend

CENTURY 21 People's Choice Realty Inc., Brokerage*
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