Our current market is a result of many factors, not the least of which is fear. There have been many articles written in our major newspapers about the bubble about to burst, or other such forecasts of doom and gloom that people just don't know what to do. The occasional assurance is offered in print or on the news that "most real estate analysts don't think we are going to experience a crash".
I have watched the values of real estate go up, go down, go up, go down over the last 30 years. People are playing the wait and see game. So values may go down a bit - maybe more than a bit. In 1980 my husband and I purchased a piece of property for $110,000.00. Within two years the value fell to $85,000.00 but we had not over extended ourselves so we just kept paying our mortgage and got on with our lives. That property today is worth over a million dollars (no longer owned by me - too bad).
So, what am I trying to say? It's simple math. Prices will continue to go up in the long run. There may be some ups and downs along the way but there is a steady climb in the long run.
The best advice for buyers is to give up trying to time the ups and downs of the housing market. Buy a home when you can afford it and you find one you like. That means you should not be trying to figure out the highs and the lows.
What you should be looking at is what happens to your cost of borrowing if you put off your purchase over the fear of a short-term decline in prices.
Currently interest rates are at historic lows, the cost of borrowing will almost certainly go up within the next year. For people who put off buying a home now because they fear real estate prices will fall, there is a really good chance that the increase in borrowing costs will be much more costly over their mortgage term than any dip in prices and may prevent them from qualifying for the type of home they want to buy.
Just as an example. If someone borrows $400,000 with a rate of three per cent, the monthly payment over a 5 year term with a 25-year amortization would be approximately $1,893.00. If the rate increases to six per cent, the monthly payment would be approximately $2,560.00 - a loss over the five year term of close to $40,000.00.
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