Tuesday, February 9, 2010


Suddenly the papers are full of bubble talk. Is there or is there not a Canadian housing bubble?

If you only read the headlines, you may think there is one.

Read the entire articles and the likely conclusion is "probably not, but we're not sure".

I don't have an answer. For quite a while, I have been concerned that the boom has been based on low interest rates and not yet supported by the economy. Our thinking was that if the economy perked up before interest rates start up, we'll be ok. If not, there will be a correction of some sort.

This seems to be what the media, banks, etc are suddenly worried about.

And the question about the economic recovery seems to be a similar debate ... Have we bottomed out? On the way up? Or another dip to come?

So I don't claim to have the answer, and I do claim nobody else has the answer. Doesn't mean I wont try to tell you what to do!
Actually, I'll mostly tell you what NOT to do.

Don't set yourself up by buying at your max price with hardly any down payment with a variable mortgage and think you'll move at a big profit in two years.

If you have enough down payment to withstand a short-term price correction; AND your income can handle an increase in payments (or your current payment schedule is attached to a fixed rate); AND you can stay in the house for a few years to ride out a correction, you should be fine.

Another "don't". Don't go hide in the basement solely because there MIGHT be a correction. If you are confident that this is a top, maybe you should hold off.

But if you aren't sure, and it turns out there is no bubble, your house might be more expensive when you come up for air.

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