Homes on my street are not moving.-Implications & Indications.

M,

In reply to your question "I notice that none of the houses on my street are moving. About 4 up for sale now for some time"



Forecasting is a fool's game - I'm wrong at least 60% of the time ... regardless...here goes.

In my opinion, we are experiencing a "pause" due to uncertainty.

Many homes were sold in Feb-May 2010 in anticipation of interest rate rises and the HST/GST on new homes (bought new in Oct-Nov 09 and sold their existing in Apr May 2010 for June 30 possession of both)

Bank of Canada kept 'talking down' the realty market (which had gone crazy -up 10% in price since Sept 09) with threats of rate hikes (actual result +0.25% -who cares, until the USA hikes rates -probably 2012 we have nothing to fear) and Flaherty made a great deal of sale-cooling noise with his CMHC down-payment & qualifying rule adjustments (this affected the "speculative buyer" of condos the most - we have little or no spec buying in detached etc freehold homes - the prices are too high)

Regardless the newswaves are filled with disasters and crises -natural and otherwise ("wars and rumours of wars", anyone?) - these negative influence and the new high prices of homes has made everyone cautious - Hubby,"Maybe I won't buy a bigger house, let's fix the kitchen next year instead, when we can see how things are going, dear"

The situation is one of two:
a) the papering-over of the Global Financial & Credit Crisis of 2007-2008 is failing and we'll finally have to pay the piper for all the excess borrowing gov'ts and individuals have undertaken. Result drastic budget cuts, big tax increases, reduction in "social" benefits to such an extreme that everyone will begrudge paying huge income taxes for such reduced "services" and on reduced incomes due to overall lousy business prospects;
-see Germany between the wars, Russia before the first WW and last para in this HST Nat Post Piece by T Corcoran.

b) it is realized that the best "interests" of everyone in the world are served by continuing the "papering-over" and the powers everywhere agree that the only way to save their currencies, their balance sheets and their operating budgets is to allow "a little bit of inflation (via currency devaluation)" into their economies.

Inflation, like pregnancy is an "on or off" thing. A little "success" in inflating, leads to a little more etc etc and before long it's out of control, we re-visit cost-of-living-clauses in labour contracts, inflation protection built into every contract and then a return of wage/prices controls.

So homes are not moving because of the price they are asking relative to the value they present to a MUCH MORE cautious buyer who is not pushed to act by "multiple offers" etc etc.

Call it Buyer's Revenge on a 12yr run of Seller's market conditions.

Time (?3mths, 9months, 36 months? 7 years) will tell -Inventory IS rising, but Sales are still being made a really good pace (prices move up when we have 6000+ sales/mth on TREB report - 8000/mth is characteristic of an excellent spring-peak, 10,000 a nightmare)

Inventory will cool as sellers either give-up on selling and stay, withdraw for the summer to go on vacation or ..... drop their asking price because they've already purchased and cannot viably carry two homes.

Strategy for Buy-Sell customers is always "Do the Tough thing first" -but those caught in transition from one market to the other are ..... caught ... and must change plans accordingly and quickly to avoid incurring further losses due to "loss of the upper hand" in negotiating.

June is a bit slower than last year (projected to 8500 from the 20th data), but about on par with the average of the last 9 years (see att Word.doc) So was May BUT this followed record months in our (weather-blessed)"spring market" of 2010

It could be that our "spring" came 6-8 weeks early and so the normal "lull" during the summer is also 6-8 weeks early.

Canada is faring very well as a currency, as an oil-producing nation, as a home of prudent banking/lending and as a not-quite-as-wildly indebted nation (compared to the others and Europe)

On top of that the GTA is the centre of Canada, biggest city in the "best country" etc and so in my view we will be affected as GTA'er in Canada the least of any city in the world. We didn't really have a boom (til recently) and so we won't have a "bust" (but we likely will give back all the $$ increases since mid 2009)

I feel that inflation/devaluation will become the world-wide gov't solution and the price of gold, silver, homes, all tangible assets will soar (as buying power of the 'dollar' is undermined, but as wages are kept up by the abovementioned C.O.L.A clauses in employment contracts)

Interests will remain low (maybe creep up by one% over 2-3 yrs)- because gov'ts are the biggest borrower and need to contain their "interest cost" expenses .... or raise taxes and cut services (neither one a vote-getter)

As interest rates rise (simultaneous with house prices being bid up by Buyers wanting to lock-in "half-decent rates) we'll have another boom like 1985-1989 .... but the central banks will not be able to raise rates to 14% to curtain borrowing .... without killing their gov't budgets. We'll soon be in unknown, uncharted territory.

Pick your timing (between now and 2012) to buy the biggest house you can afford in the super-primest location with the biggest 10yr term mortgage you can handle (it wouldn't hurt if it was a corner lot, and/or near a busy interesection and/or a multi-unit building either) .... and then wait til interest rates start moving above 5%-6% and sell into the whirlwind.

Jamaica/Tahiti (etc) .... here we come .... with our savings in precious metals (real thing not certificates) and our money in Swiss francs and Canadian dollars.

But what do I know .....

Perhaps the Lord will return soon and it won't be a concern any longer