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Correction? What Correction?Housing Affordability And Market Strength



buying a home is not impossible, just expensive
Home Sales Slowing


Glass half empty, glass half full. It wasn't too long ago, the Fed and BOC had a "damb the torpedos" attitude, full tilt interest rate hikes, we don't care how much pain and mortgage stress we create, we must at all cost get inflation in check. that was last week...


This week, start of 2024, the Fed is now predicting 3 rate cuts, and Canadian enonomists even more... what a change of tune... so what happened?


I think the pain of ressession, the current "Correction" in the housing market (which hasn't even began yet) and the response from voters is starting to seep through. Banks are cutting deals in the fixed Mortgage Industry far below Variable rates, Why? They see rates getting a lot lower a lot sooner. A mild Recession is now expected, no just being considered, based on all he up and coming defaults that are being predicted, but don't worry says Phil Soper

"When interest rates start to fall, he predicts that will be enough to convince Canadians that the home they buy today won’t be worth less tomorrow, clearing a path to get back into the housing market."


Sorry Charlie, thats not the way it works, it doesn't just Magically end, we have 6 months to a year for this to play out to the end. This is how it works... The Economy booms (because interest rates were too low for too long... oh and Covid... forgot about that) people rush in and buy buy buy... and then the bubble bursts, Economy goes bust, we slide into a down turn, damage control kicks in, rates plumment, and Fed's sell treasuires to flood money into the economy, and away we go again. Rinse and repeat, only we haven't gotten to the rinse cycle yet... its still coming.


Read between the lines in this article, Hauge and Phil baby have vastly different opinions on what will unfold in the coming months... Resets are happening, people will default, more houses to come on the market, when they have no choice, this doesn't sound like the Rainbows and Candy floss that Phil is talking about... Sure, we may not see a doom and gloom full blown Recession, and there may not be a catastrophic Housing Crash. But we are also not at the bottom of a market cycle, we are at the top.


"I am never gonna be able to afford a house..." oh shit, cry me a river... I have been hearing this for 30 years... it was no different in my time, and it is no different now. So if newbies, and immigrants cannot buy a house, why are they costing a Million bucks for a tear down shack? Who is buying and paying these inflated prices? The same people who said they couldnt afford a house 10 years ago. Like me, they saved, they increased their salary, they both work, and with a bit of luck... got in at a good time. For me it was 2012, for you it might be 2025? Who knows. I depends on where you are at, what you can afford, and what you investment horizon is. If nobody coulld afford a house, there would be no housing market? Oh... that sounds like a crash to me.


Also Phil, I hate to be the one to tell you..."Nobody buys in a falling market" So why would anybody buy when rates are falling?


A. prices will need to hit rock bottom

B. Mortgage rates will need to hit rock bottom


Why pay more, when it will be cheaper tommorrow ? Answer: You don't, you wait.


So what can we do now? NOW, is like no other time in the last 20 years. Rate have finally normalized to where you can actually get a return on a fixed income, hurray, so take advantage of it now... it won't last long, and in fact we have already turned a corner.


Bonds will continue to appreciate, as rates drop, fixed income looks great, and Equities are topping the markets, so now is the best time ever to rebalance based on your set investment horizon, and comfort level. You can't lose. Move some, not all, of your riskier stocks/funds/etfs to a cash cushion, and bond allocation, at the same time, dollar cost averaging your new purchases across the board, based on allocation. We will discuss this strategy in depth a lot more in another section, but there is a lot of this info out there already, and you can always talk to the NL@TB.


And lets wait and see shall we? Happy New Year, we have an exiteing year ahead...

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