What Goes Up Must Come Down

Homeowners have been clapping their hands in glee since this past spring, while renters have been wringing theirs in worry. All of this because home prices keep going up, up, up. Good news for those who already own or are thinking about selling, bad news for those who are thinking about buying and the high mortgage that’s going to come with it. But just how long are prices going to stay at the top for? And just how high are current home prices anyway?
According to the Teranet-National Bank House Price Index, the average price of a home across Canada creeps somewhere near the $371,000 figure. But in certain parts of the country, such as Toronto, they’ve gotten as high as $456,000; and in cities where it’s known to be uber-expensive to buy, such as Vancouver, the prices have shot up as high as $786,000. That’s twice the national average! It’s no wonder why homeowners are so happy, and renters think they are looking at a very bleak future. But just how long will prices be this high? Well, what’s good news for some is bad news for others. And that’s the fact that prices simply cannot keep climbing forever.
Yes, Canada may be in somewhat of a housing bubble at the moment. And yes, that bubble is expected to burst during the second half of this year. That’s good news for renters who are looking to take on an affordable mortgage some time in the next 6 – 12 months. But what does it mean for those that already own their home? Well, it might mean to hold off on borrowing against your home equity, especially if you’re thinking about selling your home any time soon. While you might want to use that money to pay emergency bills or to add on a home renovation, you may also want to hold onto the 40, 50, or 60 percent equity you already have in your home. This is especially true for those who are looking to sell in the near future because they simply won’t have the time to recover that equity. Doing this could result in selling your home for less than the amount your mortgage is on it.
So the question isn’t actually if housing prices will come down, it’s when. Knowing that it will happen at some point though, will be a big help when planning on what to do with that home (or that soon-to-be home) of yours.