Here We Go Again
As it turns out, the housing market is reportedly stabilizing as we, among many others, have been talking about for the past couple months. The interesting portion about this is where the stability is being derived from. From what we can see, there’s a large number of investors putting their money into luxury real estate…but that’s about it. A news clip from CNBC stated that 24% of Americans making over $450,000/year are in the market for real estate (more specifically luxury real estate) which is a substancial 7% increase since last year. The market has of course bottomed and started to show signs of stability, but the only people who seem to be able to afford taking advantage of this situation are the people who were never really affected by it in the first place.
Low interest rates, low prices, and promise of market improvement is any investor’s dream, but what about the rest of the population that doesn’t even come close to making that sort of coin? Heck, Canada’s housing prices still haven’t even bottomed, and are expected to drop another 10% over the next two to three years. So, while wealthy investors, foreign and domestic, take advantage of this situation, there seems to be no weight being thrown around by the “average” social classes, which is kind of a scary thought. Why? Because when a market cheapens up, if there’s only a small population of people who can afford to have a piece of the pie, it makes for a really unbalanced property market. Yes, it contributes to market recovery, but if luxury properties are the only ones being circulated to seemingly increase their value, while making no contribution to evening out the rest of the market, it may lead to another collapse down the road.
New mortgage rates in the US are dropping to try and increase purchasing rates and entice new buyers, which is great, but in Canada they’re going up…and they’re cutting mortgages shorter to boot, pushing new buyers even further away from their purchasing goals. Homes and properties are being purchased, but the way this is weighted doesn’t spell good news looking down the road. If the rich get richer, while the rest of us scrape our change together to make the same level of purchases, the market won’t stabilize. Keep in mind that renting rates are going up in conjunction with available properties instead of the ideal situation of new buyers rising in conjunction with increasingly available properties. Collectively, this doesn’t exactly scream “recovering market” as much as it does “impending monopoly”.
article originally published via EstateVue
photo courtesy of f_shields