Securing and building on equity in an existing home – whether using a home equity loan to make value-added home improvements, or perhaps parlaying some existing equity in a diversified, conservative investment portfolio – could become a more pressing issue in what may becoming a ‘decidedly undecided’ real estate market.
“What to expect next from the housing market has become a major guessing game among economists, consumers and those in the real estate community,” writes Garry Marr of the Financial Post. After what he characterizes as “the longest bull run in the Canadian housing market,” Mr. Marr suggests that “everybody from the consumer to the mortgage broker to the real agent may have to accept a new real estate reality: For the first time in a decade, housing might become boring, with flat sales and price increases just ahead of inflation.”
“Traditionally,” Mr. Marr writes, “the real estate industry sold the safety and stability of housing compared with investing in the stock market.” However, he notes, “over the last decade, the story has been capital appreciation.”
The question this begs is: How – in what may become a ‘new normal’ – can homeowners who have built a healthy cushion of equity in their homes, protect, and ideally leverage, what for many is their biggest investment? Assuming that you will continue to passively accumulate and build home equity through year-over-year double digit market gains could well be a false assumption.
In a real estate market that is likely to return to a more historical norm of moderate, slow growth in home prices – characterized by Century 21 Canada CEO, Don Lawby, as: “cost of living and a bit” – leveraging existing equity through a home equity loan, either to make improvements and protect your home’s value or to diversify into a conservative investment portfolio, may be a winning strategy in the longer term.
