Posted 5.22.13 @ 11:35
A sore spot for virtually any homeowner trying to sell their real estate, you have to ask yourself – how overvalued are our homes? Here we’re going to break it down and see what all this data means. Check out the infographic below and see for yourself.
Worst Case Scenario: The Economist
Known for its witty and biting financial and political reporting, The Economist is something a lot of us turn to for our news (I know I do!) – but according to them our homes are a whopping 78% overvalued and the housing market is going to drop like a lead balloon any day now. They’re comparing how much it costs to buy a house versus how much it costs to rent – but since most of Canada’s major markets have taken a long time playing catch up with rent prices, it’s no surprise that we rank so high of the 18 nations surveyed. According to a recent Ipsos Reid poll by the RBC, many renters are turning to buying a home because they don’t want to deal with rising rentals.
Not Too Bad Scenario: IMF
According to the IMF, Canadian homes are only overvalued by about 10%, which isn’t too bad (especially when you compare it with the previous evaluation!) While interest rates are due for a hike in 2014-2015, it won’t be a giant market correction of biblical proportions. Employment, interest rates and housing prices have remained on a steady incline, and interest rates will move along the same path.
Iffy Future Scenario: Fitch Ratings
Fitch, like the infographic states, is relying on American data to forecast the Canadian market. While we do have a lot in common, most Canadians aren’t in the money pit like the Americans were back in 2008. Many Canadians pay off their mortgages within 12 years, most aren’t mortgaged or HELOC’d out to the hilt on their homes. Saving for the future is a big part of our financial culture and many (if not most) see investing in Oakville luxury homes and real estate period as a long game, not a short one.
New Mortgage Rules Taking Hold?
Love them or hate them, the new mortgage rules seem to have put a dent in speculation. Around 12% of Canadians today can’t qualify for a mortgage and will have to wait an additional 2-4 years before they can buy a home, but it’s a small cost to pay for economic instability.
One of the best things Canada has going for it is that it’s not in the same situation America was in when it had its housing crisis. We don’t have too many subprime mortgages floating around (since the prime rate is almost as low as humanly possible as it is), and the rug isn’t about to be pulled out from under millions of home owners. While debt is always a problem, we’re a lot better off than the people down south were!