Market Slump Contributes to Recovery

You’d think that the market being down in the dumps would be something to worry about, but according to new theories put forth by several economists this could be somewhat of a God-send for real estate recovery.

Like we were saying in our post ‘Collaborative Recovery’, in order for the real estate market to recover, we need to see participation from all areas of society rather than the elite. Well, prices being as low as they currently are could in fact be what we’re looking for to jump-start the climb out of the market’s shriveled state. Couples, young families, or whomever else, have now been granted the opportunity of a low-cost housing index (for the most part) which is exactly the type of stimulus the market needs to recover. The low prices could very well be the icing on the cake for a lot of potential young buyers, who may otherwise not have been able to afford a home. Now that mortgage rates are so low and housing prices having practically never been lower (at least for quite some time), we may finally start to see the collaborative initiative required for a wholesome market recovery.

Through this, theories are also being put forth suggesting that the Canadian market won’t take a second dive like our neighbours to the South as statistics put forth suggesting a second crash were in fact misconstrued and did not account all factors, especially when compared to the US market. For example, the debt-to-income ratio, when compared to the US, didn’t take into account the amount of extra benefits Canadians receive through their debt such as healthcare and other subsidized services that the US doesn’t provide, therefore weighting economic predictions in a direction that may not be entirely comparable after all.

The only way to tell if any of these theories come true, is of course time. However, the prospects being put forth don’t seem shy of being on the right track…we hope.

image courtesy of USACE-Sacramento District

Collaborative Recovery

A short while ago we talked about how the real estate’s market recovery will more likely than not depend on full societal collaboration and participation within the market, in a post called ‘To Stabilize We Must Equalize’. If only those who are in good shape participate, then top-end properties circulate freely while mid-level properties stay put and depreciate.

Looking into the future, this concept is seemingly being applied to various markets already, which is a huge step in the right direction. Participation is going to be the key to market re-stabilization.  In the US, it’sshowing that dual-income households are helping largely in this aspect. Therein lies the example that multiple participants working towards a common goal within their own households are improving the market in its entirety. An annual study by NAR showed that about 65% of all buyers are married couples, as opposed to 58% the year before. This increase in efforts is exactly what we need to see.

According to a recent Scotiabank poll, an impressive 77% of Canadians view home purchasing as an investment as opposed to an expense. With this mentality, Canada will hopefully follow-suit with our neighbours to the South in investigating the proper investment methods that will not only benefit the buyers and sellers, but the market itself. Recovery is close, now it’s just a matter of harnessing interests and investment strategies to collaboratively force a market recovery.

 

image courtesy of Ken Jarvis Photography

To Stabilize We Must Equalize

Speculations around market recovery are many. The desolate state in which the property market resides is remaining stagnant, with fragments of measurable recovery being made. Therein lies the question of how to inject some life into the current market; enough to drive a full recovery.

A recent Vancouver Sun article highlighted a very interesting and probable theory put forth by Vancouver’s Mayor Gregor Robertson. The concept he proposes is that more low to middle-income housing must be implemented in order to develop an efficient housing market recovery. Reason being is similar to a concept we covered in a previous blog post – Here We Go Again – that covered the principle of a market recovery being impossible wherein the lower-income citizens couldn’t participate in the market themselves. If only the wealthy are purchasing and rotating properties, then the market only fluctuates above a particular income bracket, as opposed to that of a fluid recovery that encompasses the efforts of all classes within a particular society.

The concept of introducing affordable housing for the lower and middle-class is quite ideal. In order to stabilize the property market, we must first even the playing field. If implemented successfully, this methodology could quickly yield beneficial results, as a rounded market recovery rather than a weighted one would increase and stabilize real estate across the board instead of augmenting the values of high-value properties for relatively elite citizens to exchange amongst themselves like poker chips.

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image courtesy of Antanith