It’s tough to make predictions, especially about the future!– Yogi Berra
This is the inevitable question that comes up whenever there is a crisis or calamity of some kind like the S & L (savings and loan) scandal of the 80’s, the dot com bubble of the 90’s, 9-11 (2001), the Wall Street meltdown (2007-8) and now the coronavirus pandemic of 2020..
COVID-19 has wreaked havoc on economies the world over including Canada’s. The unemployment rate was above 13% in July. The federal annual deficit has ballooned to over $350B for 2020, with the accumulated federal debt to top $1T for the first time ever.
Even BC is expected to run $12B in the ditch this year.
Thousands of businesses remain closed or are operating on fifty per cent or less capacity.
In addition, mortgage payment deferrals are being phased out and by October 1, 2020 no new payment deferrals will be granted any special consideration (from March to August this year, banks could permit customers to defer mortgage payments for up to 6 months without considering the loans to be in default, nor to set aside additional capital to cover defaults.
Approximately 760,000 borrowers took advantage of the mortgage deferral program which is about 16% of the entire mortgage portfolio of all the banks (however, on a slightly more positive note, Equitable Bank has reported that its mortgage loan deferrals have been steadily declining and now represent just 6% of its portfolio.
So, with this type of bad news front and center every day, why is the real estate market behaving in a positive and robust manner?
Pent up demand, extremely low interest rates and a gradual re-opening of the economy seem to have buoyed the real estate market significantly in the months of Jun, July and August.
Will that trend continue into the fall? Will prices rise or decline? Will a “second wave” cause another lockdown?
As absolutely NO ONE knows the answers to these questions (although there are no shortage of expert predictions -which statistically tend to be right about half the time, the best advice is usually to buy when YOUR OWN CIRCUMSTANCES warrant it.
If you are looking to buy a home and 1) are qualified for mortgage financing, 2) have a job and 3) are prepared to hold the property for a reasonable term of say five years or more, then you should probably buy. Long term home ownership has been a staple of wealth accumulation in Canada for many decades. A fully paid off home often represents a person’s major asset as they approach retirement.
Waiting for the world’s endless series of catastrophes, scandals, meltdowns, pandemics, wars, and other unsettling events to die down is a fool’s game, as there will always be something else on the horizon.
© 2020 Pazder Law Corporation