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Would Falling House Prices Really be So Bad?

19 August 2012

Even though experts have been predicting a drop of only 10 to 15 per cent in home values over the next several years, lots of people are still worried about a housing bubble in Canada – especially in super hot markets such as Toronto. July home sales across the country proved just the opposite, increasing by a few percentages, but the time will come when they start dropping. When that starts to happen, will things really be so bad? Not really, and here are a few of the reasons why.

It opens the market up to everyone.
The Globe and Mail put this as just first-time homebuyers that are going to get a break but really, everyone’s going to. Let’s face it. Home prices are simply becoming way too high, and are pushing both first-time homebuyers and seasoned buyers out of the market. Bring the prices down some, get people back into the market, and see how much it really starts thriving!

Investors and homeowners will still make good
Of course the biggest fear with falling home prices is that values will plummet and both investors and homeowners will start to lose money. It’s doubtful though that the plunge will be so steep that it makes a difference and even for those that it does, property is an investment just like anything else. Sit tight, and just wait until your investment starts to bring back the returns you’ve been experiencing.

It will reward patience
As many buyers as there have been over the past couple of years with the low interest rates, there have been just as many that have been sitting tight and waiting for prices to become more affordable. Now is the time for those folks. And, while this could fall under the “opening up the market to everyone” category, we feel this kind of patience should really be rewarded and so, they get the spot all to themselves!

A deterrent to foreign investors
It’s been said by many that the sky-high value of real estate, again especially in the Toronto condo market, has enticed many foreign investors to invest in Canada – too many foreign investors. When prices come down, our real estate won’t look as good – especially as the U.S. is just experiencing a huge rebound. When they move over there, it will open the market to more Canadians – something that many feel is not happening now.

Looking at the graph above, it’s hard to consider the fact that home prices could fall. After all, they’ve been on a very steady incline. And July seemed to further prove that it will take a lot to bring home prices down. Even with a lack of buyers on the market and a drop in home sales, prices still continued to inch further up.

But what goes up must come down. Luckily for us, it won’t be a hard plunge, which really could cause potential disaster for the economy. It will however, be the slight drop that so many of us aren’t actually fearing – but looking forward to!

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