Hold the Kleenex. Buyers' market a good thing.
The press is all over the fact that the housing market is cooling. September sales were down and the listings were up. The telltale sign of a buyer's market coming in. Hold the Kleenex––this is a good thing.
Many analysts are blaming the federal government for "causing" the slowdown by lowering the maximum amortization period from 30 to 25 years, as well as not offering mortgage insurance to homes worth $1 million.
Were we not just blaming the government for the crazy roller-coaster speculation because there was a 30-year amortization before?
We seem to have proven we require some regulation to keep us on track. Give us a credit card with a limit of 10K and we will spend 11K, taking out another card to pay for the difference. The feds are simply protecting us from ourselves.
Generations before us saved until they were able to buy. We, of the instant gratification era, will borrow now because we want it now and deserve it now. We will pay for it later. But, what if the market softens and a country of people are living in large homes they can no longer afford?
We will definitely be paying for it.
The move to 25-year maximum amortization period was a prudent move. The fact that some people now can not afford to buy the high-end home they wanted is not a bad thing. Here is a novel idea: live within your means, now.
If you can't pay the mortgage on a 25-year amortization but could if it was bumped to 30 years then you should not be buying that home. One little uptick in the interest rate, which will be happening, and you will be defaulting anyway. Give yourself some breathing room.
So, the scary stats of luxury homes are not worrying to me. There were 71 high-end West Vancouver homes sold in September of last year and only 43 this year. Home sales in Greater Vancouver are down 33 per cent.
Prices so far have not been tumbling. We have owners willing to sell if they get $X and buyers willing to buy if they get it for $Y. That spread is still too large because the sellers know what neighbours got last spring and the buyers see the market declining and want to pay next year's prices now.
Things will slow down, prices will come down and it will be fun to start shopping again. In the meantime, I advise my clients to not list right now. If you need to move, don’t buy until you have sold––or, at least, use the "Subject to Sale" clause.
Maximize your assets to weather the storm. Secondary suites, laneway homes, even rental garages, can all help add to your cash flow.