The Housing Market in Ontario and Kitchener Waterloo

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Buying Homes in KW in 2008 and 2009: There still is hope!

I have been hearing it all over Kitchener Waterloo: “Should I buy a home right now or should I wait?” I’ve heard this from people who currently own a home and are toying with the idea of selling as well as from people who have never bought a home before and are thinking of dipping their toes into the biggest financial investment of their lives. Nervousness and apprehension saturate the air. A recent article in the Record claimed that sales were down in October of 2008 by 21.5% because buyers were generally reluctant to put in offers. This has translated in a longer average time for houses to stay on the market, although in KW so far, this time difference hasn’t added up to much. In September, for example, detached houses in KW were only on the market a few days more on a average than the previous year (45 to 49), and while this average period may be expected to increase, I do not believe that the KW housing market will slow to the same degree that Toronto has and will certainly not suffer in the same way as so many regions in the U.S.

Where does this floating nervousness come from? Some of it connects to recent global market downturns and some of it to the particularly wounded economy of our giant neighbour to the south. What happens to the States will inevitably filter up to us-that is the common assumption. However, Canadians differ from Americans in fundamental way. For once our widespread parsimony is rising up to save us. To put it simply, we haven’t taken the risks that many American businesses have. We haven’t been giving mortgages to anyone who asks for one (mainly) so we are not faced with a nationally overwhelming subprime crisis. And culturally-yes I do believe Canadians have a specific culture with common norms-we Canadians have a horror about maxing out our credit cards or engendering bankruptcy so we are not facing the back-breaking, economy-crunching debt load of the US. In short, we are in much better economic shape.

Are we in for a bit of an economic downturn here? I wish I could say no. In fact, like you, I wish I could say: if you bought a house right now and sold it in a year, you’d make substantial profit. It seems likely to me that our housing prices will stop increasing so precipitously, may even dip slightly, but I don’t believe that we are in for the same kind of real estate shakedown that Toronto has recently experienced. As a former Toronto home owner, I have experienced the Toronto real estate boom firsthand. In twelve years, the value of my property more than doubled. However, it did seem like the Toronto market had a ‘crazy’ period not so long ago; housing prices became grossly inflated; so a re-adjustment in value seems natural, even inevitable. In fact a recent Globe and Mail article stated that, in a year, the average house price in Toronto has dropped from $434,022 to $376,896 and overall sales are down 38 per cent. In KW, although we once had a very strong ’sellers’ market”, our prices did not rocket up as explosively as in Toronto, so the readjustment may not be nearly as dramatic.

While house-flipping might be a riskier investment choice in than in the recent past, I’d wager that if you bought a property right now (assuming that it is a viable choice in the first place) and held onto to it for five or more years, you’d get your money back and more. Economic cycles are part of life, but I believe that our economic leaders have learned enough to forestall a grand depression in the near future. Am I being optimistic? Yes, but even the experts admit that economic forecasts have an element of faith in them; no one really knows all the economic variables that will pan out in the end or how creative we can turn out to be.

KW’s economy is especially strong and still growing. Our universities and hospital are expanding; our downtown and shopping centres are being revitalized. New schools are being built and have just been built, including the School of Pharmacy in downtown Kitchener. Real estate investors have been flocking to put the big bucks in. As Dr. Sherry Cooper, Chief Economist of BMO Capital Markets stated in a report earlier this year: “Once the current weakness passes, we expect growth in Waterloo-Guelph to exceed both the Ontario and Canadian rates over the 2009-12 period” bmocm.com/economics. So why are we afraid? A crash in housing prices seems highly unlikely.

First time buyers can continue paying rent until they decide to take the plunge; in the mean time, they may very well miss out on that elusive ‘perfect’ house out there. Likewise, sellers can continue holding onto their property till brighter economic days, but when that will happen, remains to be seen. If sellers plan to buy another property in this current ‘buyers’ market’, they may lose a little in the selling, but gain a little in the buying. It all evens out.

So our local economy is still growing. The housing market is actually pretty stable; it is only our perceptions of it that have gone a little wonky. As Michael Pritchard said “Fear is that little darkroom where negatives are developed”. So I say-take a chance, believe in us. KW is a wonderful place to live.

Real Estate Salesperson, RE/MAX Twin City, Kitchener, ON

519 579 4110

Please check out my web site for more articles: [http://www.sandradimock.ca]

Inactive Realtors in Ontario have the option to join an Ontario real estate Brokerage that help you keep your license active during your inactive times.  Save on real estate board fees and all your other needless office expenses too.  Park your license with a reputable and successful license holding Brokerage and still earn high commissions on all your sales, if any and your referrals.  Commissions are paid to you ASAP!

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