Is it better to sell now or later? A Look at the Real Estate Market in Late 2021

Whether to sell now or later is the issue on everyone's mind right now.

"Does your storey finish and you wake up next week with a SOLD sign... or do you continue in Wonderland and see how deep the rabbit hole goes?" Morpheus might wonder.

We are currently seeing a housing boom that many of us have never witnessed before in our lives. Who'd have guessed that a global pandemic would result in such a bizarre mix of circumstances?

Milton has seen a 47 percent growth in property value in the last 24 months, equating to roughly $500,000 in gains for the AVERAGE home.

It's simple to see why cashing out is appealing. But then there's the matter of getting back into the market.

When you sell, it's great fun, but when it's time to buy, it's not so much pleasure.

Let's ignore any purchases for a moment to keep the question as basic as possible. Let's just speak about whether the market has enough momentum to endure into the first half of 2022, or if the end is approaching.

It's impossible to predict what will happen after mid-2022.

I've been having a fascinating email conversation with my customer and his friends for the past few days, and I thought it would be great to share some of the points from both sides.

As fascinating as these discussions can be, keep in mind that they're about as fruitless as trying to predict the behaviour of a wild animal.

No matter how well we research the market, there will always be some amount of unpredictability.

Sell RIGHT NOW!

The main arguments for selling now are predicted interest rate increases, which could diminish property buyers' purchasing power.

I'll attempt to keep things as simple as possible without delving too deep into scholarly economics. Interest rate hikes are used by governments to keep inflation under control, and a lot of variables are causing inflation to grow right now.

These include a booming employment market with higher incomes, greater consumer and government expenditure, and higher prices for products and services.

Interest rate hikes are very likely to occur in the near future. But what impact does this have on a buyer?

A 1% increase in interest rates will reduce a buyer's maximum mortgage qualification limit by around 10%. If they qualified for $1,000,000 at current rates, their maximum qualifying would drop to roughly $900,000 if rates climbed by 1%.

Furthermore, the current rapid rise in home prices is 500 percent higher than total inflation and 10 times faster than current salary gains. How can we expect people to afford these prices if they aren't producing more money?

This is also at the heart of the "Sell Now" argument: how much more can there possibly be?

SELL AT A LATER TIME

This is where the "Sell Later" faction enters, claiming that the market has been solid for nearly 30 years, with only a few minor falls. Why would everything come to a halt now?

With over 1 million immigrants expected to arrive in Canada in the next 2-3 years and a severe housing scarcity, the simple principles of SUPPLY and DEMAND imply that prices will continue to rise.

Right now, it's not uncommon to receive 8-12 offers on several homes for sale. Even if 20-30% of the buyers withdraw, there will still be a large number of offers to pick from.

There's also a massive movement of money from older Baby Boomers to their children and grandkids, with some estimates indicating that family now aid in 40% of purchases. This relieves some of the pressure caused by the rising pricing.

Housing will also be mentioned by the "Sell Later" team as a significant aspect of our economy. For a variety of reasons, including the fact that the government backstops mortgage failures through the Canadian Mortgage and Housing Corporation, the government has a direct interest in seeing it succeed (CMHC).

If interest rates rise, the government may begin to relax its stress tests, which were implemented in 2017 to prevent borrowers from taking on more than they can handle when interest rates rise. This could alleviate some of the pressures brought on by rising prices and interest rates.

What are our options?

Most individuals will agree that a roughly equal number of points on both sides is reasonable. That is the conundrum. In the real estate market, it's an exciting moment.

"Which choice helps me sleep better at night?" is an useful question to ask yourself to help you decide.

Make decisions that will provide you with the most peace of mind.

You're effectively playing "chicken" with the market. The longer you stay on track, the better off you will be. Until it's too late, that is. The real estate market is always changing. It's too late by the time you realise what's happened.

But, as Kenny Rogers will tell you, the trick is to know when to hold and when to fold your cards. You won't know if you made the right decision for months!

We'll be right there by your side, helping you in any way we can, whether you take the red pill or the blue pill.

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