Quote from TruthTeller:
It won't continue as it has. It doesn't have to. Never said it would.
But failing to buy a first home because prices are "high" overall is not a wise decision. There are always good deals to be had for those who will bother to look. There are ALWAYS sellers who are distressed, for many reasons, and who will give a good deal. And interest rates will continue to rise.
So the alternative is what? Pay higher monthly costs down the road for many years while waiting for a correction that may well never happen, and isn't really needed? And in the meantime you're writing checks to someone who owns the roof over your head? No thanks. Better to lock in an interest rate now on a good buy.
When buying an investment property, timing is everything. But NOT with a primary residence. It's a lifetime road, and the sooner one starts, the better. Without question.
Let me put it to you this way. Yes, you are correct that at some point you generally speaking need to buy a property if you plan on owning your own home. Yes, it is likely very, very difficult to time the market.
But the thing you need to remember is that the number of potentially distressed sellers is a negative, not a positive, and believe me, it's growing. I work for a mortgage company, and I see people paying huge mortgages in some parts of Canada, and have no idea how they make ends meet.
Granted, I'm still finishing up University, so my earnings aren't there yet, but it seems difficult to imagine budgeting $2000-$3000+ per month for just the mortgage payment and property taxes. Add things like a vehicle, food, child expenses, etc., and you have to be making pretty darn good money to support that kind of lifestyle. Average wage in Canada is something like $35,000 to $40,000 per year if I remember correctly, I doubt it's much higher in the US.
Another interesting point is that subprime lending appears to be on the upswing in Canada. There are now a few companies that specialize in high risk, high interest rate mortgages. Interest only products for at least a portion of the term are becoming more common. We still don't have some of the crazy products that you do in the US (such as option ARMs, negatively amortizing mortgages, etc.), but "alternative" lending is definately becoming more popular.
Why do you think that is? Because the more conservative lending institutions will not give you a mortgage unless you have a very clear ability to pay your mortgage (or a very sizeable down payment at the time of purchase).
What exactly do you think is going to happen to the housing market when large numbers of consumers start defaulting on their mortgages? Buying right now is equivalent to buying stock indexes during the late 1990s - there is still some potential upside room, but the downside could be very significant.
