Why Real Estate Market Going To Crash- Problem and Solution

High unemployment, Canadian households that are more in debt than any single nation in the G7, and a mortgage deferralcliff that’s upcoming. Gonna hit us like a freight train, are just some of the reasons why Canadian real estate is going to crash. But what about the limited supply, employment numbers improving, and government intervention? Will those balance out these negative factors and prevent the real estate market from crashing in Canada? On this Article of Bald Prairie real estate, I’m going through five reasons why the real estate market’s going to crash and five reasons why it might not.

It was “why hasn’t the actual property market crashed but”.So if you wish to examine that out for some context, go forward. I will put a card upright right here so you’ll be able to have a look. But in this article, I’m going to present to you five reasons why the real estate market is going to crash and five reasons why it might not.I’ll let you guys make the decision, what you think is gonna happen.

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Is the real estate market gonna crash and why? Now I don’t do predictions. If you know me, well, I like talking about what has happened. What are some factors going on in the market right now? Kind of give you an overview of where things are at right now. So if you wanna check out my most recent Canadian real estate market update video, I’ll put a link up, So you can take a look at that as well. But I don’t do predictions.

That’s something that CMHC does. They did a video recently, or a market update or forecast, I guess we’ll call it. And they said the real estate market was gonna go down in 2020 by 18%. And then in the back half of 2021prices would start to recover. Well, since that prediction was made in May, prices have gone up and sales have gone up. So that’s one of the reasons I don’t like making predictions. I just like talking about what has happened. So enough of the chit chat let’s get into telling you about five reasons why the real estate market isn’t gonna crash before getting into why the real estate market is gonna crash. First up in my reasons why the real estate market isn’t gonna crash, it’s gonna be government intervention.

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Now, the reason I bring that up is that we don’t really knowhow motivated the government is going to be to add liquidity to the market, keep interest rates where they’re at, add special programs, all that type of stuff, throw incentives, especially a government that’s potentially facing an election here in the fall. So that’s why I put him in…I called it a wild card in that last video, you don’t know what the government’s going to do. If you do, let me know. Somebody, give me a quick holler, I’d like to have an inside scoop into what’s going on with the government’s thought process right now, So I could raise my clientele.

Hey, there’s a new program coming out, but that’s a type of stuff that you just can’t make predictions on, but we know that the government is not gonna wanna go into an election with the real estate market being bad or the economy being bad. So they’re gonna do whatever they can to keep those two markets strong. Next up, we’ve got to talk, supply, and demand. This is one of the most important factors in the real estate market.

It’s pretty self-explanatory, but yet it’s a problem we keep seeing come up over and over again in Canadian cities. And that is, it lacks the supply to meet the strong demand. Many Canadian cities, especially the biggest markets, like Vancouver and Toronto, these are the two best examples of this, are constantly constrained by supply problems. And they even have geographic boundaries that make things even worse for them.

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Vancouver, you’ve got the ocean, you’ve got the US border and the mountains kind of funneling everything from West to East there. They don’t have a lot of room to expand and make land and house prices more expensive. Toronto of course has the Greenbelt and the Lake there. There are only so many places they can build before they have to expand significantly further out increasing commute times that people might not want. So that limited supply why across Canadian cities what is currently keeping prices where they’re at. And if that supply problem doesn’t change, if there’s still a strong number of people wanting to buy houses, more people wanna buy houses then are willing to sell their homes or homes available for…Prices aren’t going to crash.

So until you see inventory buildup in some cities in Canada, we’re seeing like one or two weeks’ worth of inventory. Until they start building up to five, six, seven months of inventory. You not gonna see prices decline. How about low-interest rates? That is another big factor that’s going to keep prices and demand where it is right now. The first level of The Bank of Canada and the government’s gonna pull when they see the economy slow down is they adjust interest rates down and when the economy speeds up, they’ll adjust them back up. But The Bank of Canada has already committed that they want to keep these low-interest rates for the next couple of years. So right now in August of 2020, I’m seeing five-year mortgage rates, fixed rates at under 2%.

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Those are all historic lows. I don’t believe money has ever been that cheap to board or buy a house ever in Canada. So those low-interest rates are allowing buyers to spend more money if they want to keep their payments lower. This has got people off the fence, buyers that aren’t sure of buying. They see as low-interest rates go…I can buy potentially less than my rent cost me.I’m going to go out and buy a house. So when those low-interest rates are out there, it’s gonna encourage people to go and buy. It’s going to continue the demand side of things, which will reduce the supply side. And we gonna go back to that supply and demand problem. Those low-interest rates encourage that low supply and keep prices where they are, or even increase them.

Where the jobs market goes, generally, that’s where the housing market goes. So when we saw massive unemployment numbers to start, that was a big fear that these jobs would not come back. And then you would have people that simply couldn’t afford to buy and couldn’t afford their house that they’re in right now. But as of August, 2020we are seeing is a recovery in the jobs coming back, people are getting back to work, working more hours, full-time hours, things like that. So if the jobs continue to improve and we see unemployment numbers continue to come down, that’s gonna keep stability in the housing market.

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Now I know I promised to give you five reasons why the real estate market isn’t gonna crash, here’s a bonus one for you and its immigration. And I’m putting in kind of a wildcard category because this is one we really don’t know what’s going on, and it involves some government policy, but Canadian real estate is still heavily driven by new immigrants coming to Canada.In an average year,between 250,000 to 350,000 new Canadians.And all those people would like to buy houses in Canada. So that’s a big driver. If you look at Vancouver, Montreal, and Toronto, those three cities account for half of the destination for new Canadians alone. That’s one of the reasons those markets have been so hot for so long because new Canadians move there and buy houses there.

Right now,obviously immigration is way down in all three of those centers.I think it’s now between 50% and 75%, depending on which city there, which is potentially going to hurt those cities and the real estate prices. But eventually, the government is going to reopen the doors and have more immigrants coming to Canada and they will want to buy houses. And there may be a surge of people looking to buy houses. That they’re new Canadians, they’re coming here for the first time, they’re excited to buy and if we have limited supply, we’ve talked about, that surge in demand will keep prices where they are or increase them.

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I hear it all the time in the comments. He’s a real estate agent. He’s only gonna tell you about the good things. Paint the rosy picture,tell people to buy. Well, guess what I’m telling you right now, these are the five reasons why the real estate market in Canada is going to crash and why you shouldn’t buy.I talked about it as a reason why the real estate market wouldn’t crash. Now, I’m gonna tell you, it’s a reason why the real estate market is gonna crash. And that is unemployment. We are still seeing extremely high unemployment numbers. And if those unemployment numbers don’t come down, people are gonna be unable to afford their houses. They’re gonna have to put them up for sale. People are gonna be unable to buy those houses for sale.

And you’re going to see prices come down because there just simply isn’t the demand to match the supply. So if unemployment numbers stay high, the real estate market will come down with it. How about household debt in Canada? We’ve heard it time and time and time again, that Canadians on average have the highest household debt of any G7 country. And it’s astronomically high compared to even the next highest country. We’ve seen when the UnitedStates went through its the housing crisis in 2008, how high their debt loads were. And then as the market fell apart there debt loads came down and real estate prices came down with it. In Canada, We just kept taking and adding more to that debt, Canada households owe something like$1.75 for every dollar they make. That’s just too high and it’s unsustainable.

 

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And eventually, that’s gonna catch up and people are gonna be unable to afford houses. And it’s gonna cause prices to come down. Talking about supply and demand and that is gonna be a surge of short term rentals coming on the market and specifically in the condo market of Vancouver and Toronto was probably where you’re gonna see this. And that is, you know, the Airbnb type things, where people have decided, I can’t afford to keep these anymore. They’re not making me any money. I’m losing money on.I’m putting them up for sale. This applies a little bit to the new construction stuff. There’s a lot of new construction that’s expected to come on the market. So all of a sudden, if you have a galactic inventory, especially that short term inventory, it’s going to flood the market.

These are sellers that want to get rid of these houses. They’re not gonna necessarily hold up for high prices because if they don’t get rid of them, they can’t afford them, they might have to give them back to the bank and therefore closure they don’t wanna do that. So you’re gonna see a flood of these come on the market. And it’s going to hurt the condo market, which will drag down the rest of the real estate market with it. So that short term rental inventory, when it hits the market, is gonna cause prices to come down.I talked about this one in reasons why the real estate market isn’t going to crash.

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Well, this is a big one. What is gonna cause the real estate market to crash? And that is, I see it a lot in the comments, but I’ve read about it a lot in different economic journals and forecasts and things like that. And that is, what happens when government support ends. So we’re talking about the curb, when that ends and while also things like the wage subsidies ends and employers can’t keep employees employed anymore.

 

And those card payments, people don’t have that extra $2,000 a month. What are they gonna do? How are they gonna pay the mortgages? The answer is, well, they’re probably not gonna be able to pay their mortgages if they don’t have a job and they don’t have that extra income. So if people can’t afford their mortgages, they can’t afford to go out and buy houses. Employers can keep people employed, I gamble we’re back to that supply and demand problem.

The supply will go up, the demand will come down and real estate prices will crash because of that. This is probably the biggest one, The Mortgage Deferral Debt Cliff. That’s what it’s been referred to in the media. And the idea is that in September and October, those people that were given six months deferrals on mortgage payments are not gonna be able to pay back those mortgages or start paying their mortgages. And they’re gonna be forced to put them on the market. So we’re gonna see this massive glut of properties hit the market, depressing all segments of the real estate market. That’s what you’re seeing a lot in the media.

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And if that happens, if there is this something like 20% of mortgages, that’s number I heard,20% of all mortgages were in deferral, if those start hitting the market, Yep, that supply is gonna cause prices come down because those people they’re gonna be forced to sell. They don’t have a choice. They got to get rid of them before the bank forecloses on them. And if the bank does foreclose on those properties, you’re going to see a ton of houses. Come on the market at dirt cheap prices. So the bank can just get rid of those things and prices will come down because of those.

That mortgage deferral cliff, that’s the big scary word we’re hearing. September, October is coming up real fast now. We’re gonna know real quick, how much of a problem this is going to be, but it is for sure gonna cause some downward pressure on the real estate market. So I gave you a bonus reason why the real estate market won’t crash. And I got a bonus reason why the real estate market is gonna crash and it’s immigration again. If immigration does not pick back up, those three big centers, Montreal, Vancouver, and Toronto are going to see a reduction in the demand side of things.

And it will cause prices to come down because that is the three biggest markets for new Canadians to look to buy homes. And if they’re not looking for homes anymore, because they’re not here, well, that’s going to cause those 3 really hot markets to start slowing down. So that’s your bonus reason, is immigration. There you have it. The real estate agent told you of reasons why the real estate market’s going to crash, right now. It’s on record.I’ve had a lot of people telling me, say it in the comments,

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I just lied to you, I wouldn’t tell you if the market’s going to crash, even if I knew it was coming, I’m just trying to make a buck, I got a vested interest.I’ve heard all the reasons, guys. Don’t worry. I’ve heard them all. I check every single one of the comments and responds to most of them. But there you go. Now I’m on record. I just gave you five reasons why the real estate market in Canada is gonna crash. Heck, I even give you a bonus reason. I gave you six reasons why the real estate market’s gonna crash.

Now, what do you guys think? What do you think of the five different six different reasons whether real estate market is  or isn’t going to crash? Let me know in the comments below. If you think I’m right as to what’s going to happen, or if you think of an additional reason that’s gonna cause the real estate market to crash or not crush.

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