What a market! Dispite prevailing opinion that interest rates did not have much further to drop, we see lenders again and again drop rates on 5 year product to entice customers. This is gratifying for me as a mortgage broker because I get to be the bearer of good news! But how long can this be sustained?
China is on a buying spree securing real estate, resource companies and supply contracts. The timing is suspicious as it indicates the Chinese do not think the market will drop further.
Housing inventory is moving, albeit at lower prices. Certainly no sales records, but inventory is clearing in many markets across Canada.
Interest rates are making rent unaffordable!!! Why pay thousands for rent, when you can purchase a home for around the same dollar and less.
Job losses are multiplying. Unfortunately, recessions wash from the market, companies that are inefficient, non-competitive and weak. Once the weak are purged from the system, the strong will have room to expand and hire. Just watch the head hunting successful companies are doing right now.
Savings are up. Stats show that personal savings are increasing due to market uncertainty...but be assured, money in the pocket eventually burns a hole! This savings cash will turn the stock market into a bull.
The danger of stimulus money, increasing availability of loans and bull market attitudes is inflation. Too many dollars chasing the same item...leads to high prices. Funny I would mention inflation as a concern in this deflating, eroding price environment...but it all relates back to inventory. When the savings return to the market, the ball will bounce and we will see a second run on price.
So my advice is as follows:
1) protect your investments by locking in with a low interest rate. Obtain low interest credit products for use later on.
2) if you buy, be prepared to sell early next year to take advantage of the bounce
3) beware the next drop. Savings will be the force behind the next inflationary wave...when they deplete, there will be nothing left to drive the market...watch for signs the market is slowing and be prepared to jump.
The fun thing about a crystal ball is that it is just guesses and mental exercises. My opinions are my own and I front them for discussin purposes only. What do you think is going to happen?
Steve Bucher, Mortgage Consultant
INVIS KAMLOOPS www.mortgagebuilder.ca