Buying a House In Today’s Market

I find it interesting when people talk about “Canada’s housing market” as if it is one homogeneous entity.  Of course when one thinks logically about the concept it seems ridiculous.  How good such a massive area, with completely different geographical and economic factors, be summed up by one headline?  Inevitably then, any headline that refers to “Canada’s housing market” is really talking about Toronto, maybe Vancouver and Montreal, and possibly a dash of Calgary and Edmonton thrown in.  The other places really aren’t represented well at all.  If it is tough to broadly describe Canada’s housing market, it’s even tougher to give generalized advice to everyone, but the question of when to enter the housing market is on a lot of people’s minds right now.

The new norm in Canada up until the end of 2012 had been homes going on the market, and then coming off of the market a week later while fetching 10-30% above the asking price.  That’s a pretty incredible precedent, and realtors were able to capitalize on the momentum by saying, “Get in now before you can’t afford a home anymore. Oh, and by the way, make sure and take advantage of low mortgage rates before they’re gone too.”  As we’ve seen in the months since Mr. Flaherty reversed the Conservative position on mortgage lengths and a few other housing-related pieces of regulation, this is definitely not the norm anymore right across Canada.  Depending on where you live, the headlines might say that housing is holding steady, or that it is in the middle of a pretty big reversion to the mean (namely in B.C.).  So how to play a deflating housing market and how low can it go?

Naturally if I truly knew the answers to these questions I probably wouldn’t be writing a blog about it (I’d more likely be making millions gazing into my crystal ball and letting the big shots know what to do).  It is fun to try and speculate in a sort of logical way though.  Just as housing had sort of generated its own positive momentum before, I think a strong case can be made in some areas for housing to now cycle downward.  As people hold off on buying in the hopes that the market will continue to sink, it becomes a self-fulfilling prophecy and demand subsequently shrinks.  On the opposite side of the ledger, anyone thinking about selling their house in the next few years must be feeling a whole lot of pressure to get that thing on the market ASAP and try to get out while the market is still relatively close to its peak, and before this deflation erodes any more of their house’s value.  This should in theory create a glut of homes on the market.

If all this comes to fruition, when does a person try and “buy low”.  Wall Street has this ridiculous phrase about trying to catch a falling knife that means about as much as any other ridiculous Wall Street phrase, but the point of deciding when a market cycle is close enough to bottom to buy into is a solid one.  The really frustrating thing is that it will be different in each area you go.  Trying to hit that sweet spot between taking advantage of the all-time low interest rates we’re experiencing and being patient until home prices hit rock bottom will be the trick over the next couple of years.  I’d argue the best way to give yourself a shot at hitting this sweet spot is to comparison shop using sites like Heritage Home Loans and ratesupermarket as well as keeping track of your local real estate market.  Keeping up with recent trends and putting your finger on the pulse of housing in your area will allow you to maximize your real estate dollars.