Fall Market Predictions

Predictions are useless.

It’s time to enter the arena of making predictions that 9 times out of 10 fall flat on their face, but at least they start a discussion going (for better or for worse). I have been reading a lot of Realtor opinions lately on the direction of our housing market in the Fall 2017 (and beyond) and wanted to add my 2%, errr, 2 cents.

I know a lot of you like to read the newspaper, make comments on Facebook, watch your twitter feed by-the-minute, check out the evening news and generally talk housing in the dog park. How do I know this? Because I hear it, I get asked it, and I love it.  I am basically addicted to the topic.

My predictions for the next 3-6 months are as follows, then.

(And remember, I could be wrong, on all of them)

1. Contrary to what many people think, there will be some form of a foreign-buyer tax in Toronto implemented. Let’s face it – whether you voted for the Liberals or not, they are addicted to wasting money AND looking for new revenue sources. The BC Government did something really stupid. No, not implementing the tax, but doing so in such a reckless and self-serving manner. How so? They studied data for TWO MONTHS before telling everyone whether they are in a binding contract or not that they will now pay 15% extra. Oh and supposedly 90% of the BC citizens who were polled were in favour. I don’t know about you but if I polled 100 homeowners and asked:

“Would you be happy if the Government made changes to drop the value of your single-biggest asset”

I bet you $90 that 90% would not say YES. Polls suck, because they can be twisted like a pretzel. In this case 90% of all those polled said yes but that number is completely misleading! And, wrong.

2. The Federal Government will also create stiffer first-time buyer and repeat buyer rules. What do I think will happen? Easy. Two things.

1) First-time buyers will need 10% down minimum across the board
2) Repeat buyers will need 20% on any property

Or, something to this effect. This one is SCARY. We all agree FTBers power the market. If I’m selling, I am most likely going up. Therefore I need someone to buy my house so I can move up the ladder. If I can’t sell my ideal-first-time-buyer-house then what chances do I have of moving up?

Another rule change I can see is the implementation of making everyone qualify at the current 5-year posted not floor rate. What’s posted? What’s floor? I’m floored! No, don’t be. Posted rate today is 4.74% but the floor rate is around 2.49%. Therefore to qualify for a $500K mortgage I can use the 2.49% rate which is much much much much much easier to do so. This is again another mistake. If I’m taking a 5 – year fixed at 2.49% I can weather 5 years of no rate change – that’s the point of the whole strategy. Go long, at a stable (low) rate. My rate won’t fluctuate. However 5 year fixed/floor rates have fallen so much that it’s SUPER easy to qualify, hence, more borrowing, hence, the panic in Ottawa (and Toronto, and Vancouver).

3. The Federal Government will dangle a carrot for buyers by increasing the size of your eligible RRSP withdrawal to $35,000, something they promised or discussed they may do. This is designed to offset the increased down payment rule I think will eventually happen but it won’t mean much. If 50% of Canadians live paycheque to paycheque then what the heck? Who has $35,000 in saved RRSPs? Not many people I see that’s for sure (and I deal with a lot of you).

4. Private lenders, loans, and mortgages will be more heavily regulated but not enough regulation will occur because again, like with everything else it seems, the Government does not have enough data to really know what’s going on! Wait, what’s a private loan? It’s when you borrow money at obscene rates and pay obscene fees to a private lender which is primarily done when your credit is bad, you lost your job, or any other (usually bad) financial issue happens. There’s a famous commercial on the air when a guy answers the phone and before the caller even asks if they can get a loan he screams APPROVED. That’s what I mean. Stay clear if you can, talk to an ethical and prudent broker (like me!) who can help you steer clear.

(shameless plug – can you avoid it? Never!)

SO that is my “things I think will happen this fall/winter while we are raking our leaves and scraping our windshields wondering why our climate sucks” vision.

Only time will tell!

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