Using a home equity line of credit, second mortgage or home equity loan to finance home improvements may be a better investment for existing homeowners, as more balanced markets emerge in most metropolitan areas in Canada.
Sales of existing homes dropped 11per cent between June and July – which may be an after effect of the introduction of the Harmonized Sales Tax in B.C. and Ontario – but also fell 31 per cent, as compared to July of last year, according to a Conference Board of Canada report released August 26.
Conference Board economist Robin Wiebe acknowledged that the drop in existing home sales could be partially attributed to the introduction of the HST, but is more likely “a matter of investor psychology more than anything.” (The Conference Board report did not track new home sales, to which the HST is fully applicable.)
The Board report points to the emergence of a buyers’ market in most metropolitan areas, but does not necessarily point to significant price drops in existing homes. Mr. Wiebe reports that July sales point to “a throttling back [of home sales] to less elevated levels.” He notes that, “Canada’s economic conditions seem sound, so conditions are in place for balanced markets to persist.”
The drop in July sales has “left markets balanced in all but four of the 28 markets” surveyed by the Conference Board; while the remaining markets in Victoria, Calgary, Edmonton and Regina are “now considered buyers’ markets.”
With flat markets, homeowners may find that home improvements financed through a home equity line of credit, second mortgage or home equity loan, may turn out to be a better use of their existing home equity, rather than leveraging that equity by trading up or investing in new housing with the extra features or living space they are looking for. A well-resourced mortgage broker will be able to advise which options for financing home improvements is best suited to your needs and circumstances.
