Archive for category Economy

Double Dip Recession? Will it Happen?

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Most investors in equities and in the housing market are afraid of a double dip recession; however, with the prices of houses, equities, and investments, it doesn’t seem likely that prices can go lower again. A double dip recession fear is what is keeping many from spending money at all. Lots of people are restraining themselves from making any large transactions in the short and long futures. Is there reason for investors to be afraid?

Fear is the greatest way to manipulate mass groups of people, and the government has the ability to manipulate the public. The government can change consumer confidence, and they can promote growth or recession within the country. Unemployment, as a lagging indicator, has been on its way down signaling that a recovery has been proceeding in the recent months. Also, all key indicators have been positive. Not always as positive as they have been expected to be, but they have always been positive. There is great hope in the markets that we are on the economic road to recovery.

There are also negative aspects that must be considered. Some goods and services, including Canadian housing prices, have been overpriced, and these goods must fall in line before the recovery can proceed full. The amount of positive aspects greatly outweigh the negative aspects, so it is likely that we will see some volatility over the next several months, but a market crash is not something that is expected.

Will the Housing Market still experience a Pullback?

Even if the market and the economy does not experience a double dip, then can micro economies still pullback? The answer is yes; unfortunately, it looks like the pullback in the housing market is a definite reaction to what has been happening recently in the housing market. The only way for the market to resist a pullback is by keeping low interest rates, but mortgage rates have been low for such a long time that it is highly unlikely that these rates will be able to remain at this level.

If the Bank of Canada did keep mortgage interest rates at these lower levels, then it can only cause a repeat of the recession that we have already seen. The best remedy for the overpriced market is to allow for the prices to fall back in line and to keep growth steady. The goal of the market is to allow for consistent slow growth, and with too much volatility, this can cause major damage to investors and the market as a whole.

Do you think that there will be a double dip recession? When do you think that the stock market will decline again? Leave your response in the comments below.

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Buying a New Build Home; What you need to know

Most people buy resale when buyer their first home; however, many new home seekers will buy a newly built property. A new build is much different than a resale property in many ways. Below is several things that you need to know about before you sign on the dotted line.

The Price The biggest purchasing point, in most properties, is the price for the property. Many people want to try and get the best deal on their property, so they want to pay the lowest possible. Keep in mind, new build prices are generally non-negotiable. Also, the price that the sales agent gives you upfront is the base price. This price usually does not include any upgrades. The upgrades can end up costing quite a bit extra, so keep this in mind when choosing a home.

The Closing Date What time you will be moving into your new home is a crucial point. The price point on the property is based on fair market value for today. If the market is expected to decline, then this usually is a bad thing; however, if the market is supposed to increase, then this can be a good thing. The general time frame for closing dates can be from a few months to a few years. Make sure that you clarify when the expected closing date is supposed to be so that you can plan your future life in the home.

Location, Location, Location Choosing a lot and a floor plan should not be taken lightly. The house you choose will remain your home for a number of years, so it is a good idea to cover all the variables. Will you have a walkout basement? Will you be south, north, east, west facing? Do you want a corner lot? Do you want to be by a ravine? Is it on a hill? Visit the lot before deciding on the lot you want.

Floor Plans Choosing a floor plan is something that you should think about for awhile. A home should be convenient. Washroom placement should be optimized. Bedrooms should have a certain amount of space. The main floor should be enough room to host parties. The rooms should flow easily between the different rooms. The floor plans should be inviting. Subtle differences in the floor plans can make large differences in how the house operates. Make sure you study floor plans before deciding.

A new construction property has several new elements to consider. Before buying a new construction, make sure to take plenty of time to review your options and to ensure that you are making the right decision. The neighborhood may take years to mature, but in the long run it could pay off.

Did you buy a new construction? How was your experience? Leave your response in the comments below.

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Housing Prices Falling; Sooner or Later?

On the news, radio, and newspapers everyone is talking about how house prices are expected to drop from 10% to 20%. At first it was stagnant growth, but now it is a bubble that is expected to burst over the next term of the economy; however, when can we expect housing prices to fall?

House prices aren’t like grocery store prices or stock prices. A house is only worth what a person is willing to pay for it. Since your house is not sold frequently, it is difficult to tell how much it is worth. When people list their property, they rely on the advice of a real estate agent to them how much they think that their property is worth. If the real estate agent is wrong, then no one will show up. If the real estate agent lists too low, then too many people will show up.

The fact is that now, no one is showing up to buy houses.

When people stop buying, people have to offer lower house prices to get people to buy. Lower prices can inspire people to buy even if they did not consider it before in the past.

How much is the difference between property values today and values if property values decrease by 20%?

A house today that would cost $600,000 would cost only $480,000 if the market dropped 20%. The difference is over $120,000. If you bought a house for $600,000 and the house dropped by that amount, would you want to stay in the market? Most likely not.

Usually, price increases tend to take years to increase; however, house bubbles bursting take a short amount of time. It can only take a time less than a year to drop into lower values. With the herd mentality, once some people get scared, then everyone becomes scared. Expect that once house prices start dropping, that they will drop fast.

When do you expect house prices to bottom out? When will you be buying a house? Leave your response in the comments below.

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