I just read a blog from a colleague in the Mortgage industry, Rowan Smith from Vancouver.

Rowan does an excellent job of showing the data and where we have come from since the crash last fall.  Congratulations to him as well for having the guts to take this position.  If you want more of this type of advice or commentary then Garth Turners Blog has it in spades.

My two cents worth is to add to his assessment by saying that although I agree the start of this mini-boom we are having right now is most definitely due to rates dropping and the corresponding 35% + savings in mortgage payments.

I think Rowan is only explaining half the story though.  In any market there is demand and of course there is supply.  He has accurately explained that demand has surged faster then expected, but he did not provide any context as to what role supply, or lack therof, has played in the prices appreciating much more then expected.

His article would suggest that he thinks waiting would be the prescription because there will be another crash, but does not tell us why there will be another crash except to suggest that demand will taper off once rates rise more.  He is forgetting that in order to forecast a crash there would have to be this cooling of demand COUPLED with overheated supply.  If demand cools as expected BUT supply does not increase significantly in fact we will be in a very comfortable balanced market.

Let me say this.  The market is HIGHLY VOLATILE and HIGHLY UNPREDICTABLE.  On one thing Rowan and I agree, if you are looking to profit with speculation in this market then you are taking a high degree of risk.  If however you are looking to buy this home to live in AND you can comfortably afford the mortgage you are contemplating, ideally at less then 35 year amortization, then feel confident in this market right now.  The future does not look brighter with certain higher interest rates.

If you are not convinced and you want to wait, then keep an eye on supply numbers not on sales or average price as they will not give you the context you need to decide if there will be a crash in prices.  What I am saying is that by the time you realize prices have crashed the market has already corrected.  To FORECAST if the market will crash you need to watch supply.  If it stays down (as I think it will) then we will balance out and prices will somewhat flatten, but you may be dealing with higher mortgage payments anyways as rates will rise.  If supply shoots up higher then expected then wait as there will be another correction.

On that note call our office and speak to one of our agents on how to buy your house today but protect you in the future with our inflation hedge mortgage strategy.