It is déjà vu time in the housing market in Canada. Most Canadians have been very enthusiastic about their glorious housing bubble, fueling it with a fathomless willingness to pay whatever the asking price. This is happening, even when international financial institutions and regulators sounded the siren when high mortgage rates « Alt-A » loan scandals appeared in the news, when short sellers began to circulate, and as prime housing property was getting out of reach of the new generation.
Purchase Your Home, Don’t Invest in Home
If the housing bubble were to collapse, the real estate market would mostly come to a halt or at least to a slow crawl. There would be little transactions with people remaining locked into their own mortgage loans. Naturally, there would be some losers and some winners. With those who are in no hurry to sell waiting patiently for the prices to bounce back, while those interested in purchasing a house will be in for a great deal. You will hesitate to invest in a house, but you would jump at this chance to purchase your first home.
Adjust What to Expect
The first thing for you to do is to learn to adjust what to expect. Naturally, in the past the home you purchased and lived in throughout your life; you pass down to your children. No doubt, this investment did gain a gradual value and increased your wealth. But in recent times, the outlook has been to look out for a 5 to 10 percent increase in value and in a couple of years, you would move onto some bigger home.
But considering the bursting of the housing bubble, it would be prudent not to look at any increase in the price of your home. Your home will be worth the same as when you purchased it, and it will be a long time before you can expect any significant increase in its value.
Don’t Try to Predict the Market
Another thing to watch out for is that you cannot time the market for it is the market that will time you. When the prices were rising, you could buy at any time and sell at any time. You were assured of a difference in the real market value for your home. But with the impending housing collapse, there is no chance of the prices increasing in the near future. It would be best to buy a home with long term gains in mind; one which is best suited for your needs and you need not go in for a better place for a long, long time.
Caveat Emptor for Excessive Credit
In today’s plastic oriented world, you should be wary of carrying excessive credit. You should strive for a clear and free home. It is advisable not to depend on your home to become your biggest asset, but most prudent to increase your cash reserves.
Trust Yourself and No Other
It is best to do your own homework and not rely too much on advice from professional mortgage brokers. It would give you more peace of mind in the long run if you were to apply due diligence to the terms of your home loan and making sure that any advice you receive is in your best interest.
Manage Your Refinancing Mortgage
You need to watch out for the fine print in the terms of refinancing mortgage loans. Though such rates may be appealing now, at the time of a price free-fall, you may not be in apposition to pay off these mortgages. You need to be looking at the long run of five years and not a couple of months when you think of financing again.