Help! Should I buy a house/condo in Toronto right now?
Any advice would be helpful. I started looking in May, but stopped when it looked like we might go on strike at the Globe and Mail.
Now I'm starting to look again and... I've lost my nerve a bit.
It some ways it seems like the perfect time to buy: House/condos in the Toronto neighbouhoods I like are more affordable now, interest rates are really low and the market seems to be headed back up.
But I have this friend, we'll call him The Pessimist, who believes Canada's bubble hasn't burst yet. Low interest rates are artificially stimulating the market right now, he says, and when they go up in 2010, demand will drop and house prices will drop too. (He believes another 10%.)
The Pessimist is not the only one. According to a recent Globe story:
[L]ow rates are also one of the reasons analysts are worried about the surprising surge in the housing market. “It's all happening because of the crack cocaine of housing, which is rock-bottom interest rates,” said Garth Turner, author of Greater Fool: The Troubled Future of Real Estate . “They're so irresistible, especially to inexperienced first-time buyers. That's what's propelling the market.”
Mr. Turner's concern is that rising rates will eventually propel the market lower by making houses less affordable. His level of confidence that the boom will last? Zero.
In his book, published in early 2008, Mr. Turner warned that the Canadian housing market was in a bubble just like its U.S. counterpart. After a peak-to-valley decline of almost 14 per cent in Canada's national average price, he's predicting another plunge for home prices that will be triggered in large part by rising interest rates.
“We're now into the housing bubble, Part Two,” said Mr. Turner, a former member of Parliament who now gives financial seminars and promotes his books. “I think this bubble is going to burst later this year. It's going to be short and intense.”
Yikes! That's my concern. And why I'm beginning to think I should rent for another year and see what happens.
But those low interest rates are so irresistable!