What’s in Store for 2011

by Jay Calafiore

Despite starting 2011 with a tragic Junior Hockey loss to Russia … the rest of the year looks quite promising for Canada. The GTA housing market performed surprising well in 2010, and 2011 home sales are expected to almost mirror those of last year.

Since the real estate bottom hit in 2008 there’s been a slow climb back up to levels and conditions similar to 2003-06, meaning a more balanced supply and demand environment. Canada Mortgage and Housing (CMHC.ca) is expecting flat prices for the GTA with slight value appreciations in the 905 area codes. The overall 2011 housing projections for Canada is referred to as “Decent volumes without dramatic movements”.

Is 2011 a good time to buy? Timing when to buy a home is very tricky business and there’s no crystal ball that can help. In my opinion you are buying a home for you and your family which is very difficult to put on a spreadsheet. I would suggest you venture into real estate with expectations of living in pleasant surroundings for a reasonable amount of time, subsequently I am confident your home value will appreciate as did your parents before you.

Conversely, if you plan to occupy a new home for only a year or two you may be challenged in realizing any profit considering property value increases in 2012 are expected to be less then in 2010 and 2011. If you are prepared to speculate short-term on real estate … I can only wish you good luck!

Is 2011 a good year to borrow?  Didn’t you hear the sky is falling? Interest rates are going up and we should all be very afraid! You don’t have to be a financial guru to understand that currently we are spoiled with crazy low interest rates and that as the economy gradually improves over the next five years (it won’t happen overnight) that all of us should be paying more normal mortgage rates around 5-6%.

Keep in mind that regulators do not allow lenders to calculate your debt obligations on current rates. When securing a variable rate mortgage at 2.2% the mortgage provider is required to use an interest rate of over 5% when determining your budget or comfort zone … this is an excellent Government safety net to avoid future “payment shock”. Let me remind you as well, that 5-6% is historically an amazing mortgage rate and if you doubt that just ask your parents.

Finally, there’s no doubt it is prudent to be diligent about spending habits and tolerance to debt. Currently there are 52 Canadian mortgage lenders ready to throw themselves under the bus to give you a big mortgage at a great rate, but without proper preparation you may be venturing into something that you will regret later.

Lenders are lenders, they are not like financial planners who build you a short and long-term budget that suits your family’s expectations. My responsibility is to first build a “Mortgage Plan” that makes sense to you, and after we would determine which of the many lenders is best suited to fund that plan?

Let me remind you that the best rate is not enough to save significant money. Many don’t realize that .2% on a $300,000 mortgage will save about $500 per year, all of us should be making mortgage maneuvers that will save us a heck of lot more than that! Let’s connect, and together we’ll explore how to save more on your existing or next mortgage.

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