Wednesday, November 18, 2009

Why the housing market is on fire even in a recession - good question!

I just watched a video interview with Garth Turner and his comments although convincing and foreshadowing as they seem, may not hold water in our current real estate market.

Watch the video here:
http://www.theglobeandmail.com/globe-investor/investment-ideas/features/lets-talk-investing/why-the-housing-market-is-on-fire-even-in-a-recession/article1365127/

Garth stated, amongst other things:

we are currently in an "asset bubble, people are delusional and nuts, lost a sense of reality, bidding beyond reality"

Garth feels the economy has surged too quick and said "we've recovered very quick, due to 3% mortgages, artificial environment, cheap money, politicians are saying recession is over and beyond us and this is artificially government created"

he feels that "interest rates are going up so the end is coming" that "sanity will come back into market, 1.5 million unemployed, businesses there because of dollars"

He made on e good point by stating in essence, "how sensible is it to buy over asking price, he feels it's crazy, that real estate is an expensive hobby, less than 15 minutes to buy a home, we exert less effort than a cell phone purchase, for half a million dollars, no conditions on inspection or financing, people are nuts, absolutely never should be doing this"

He makes some good points.

I too am a little worried about our overheated marketplace, low inventories and multiple offers, not good in the long term.

See this graph and guess where we are now:

http://www.mississauga4sale.com/Market-Emotions-Cycle.htm#graph

A mere 13 months ago we were at the point of panic and despondency. In January of this year, our local Mississauga real estate market (and most likely the GTA real estate market too) reached bottom, we were at the point of maximum financial opportunity. It looked like our real estate market and 2009 was headed for the pits, just like the US. I was uttering the words that I uttered in the years of our last recession, 1990 to 1994, the same words that many real estate agents were saying during the same time period, that was:

"Please God let there be another real estate boom and I promise not to p's (the slang word for 'urinate' but don't want to swear) away all my earnings like I did the last time" and that was how I was feeling and so were many other real estate agents last fall and early this year.

Not any more, real estate agents were euphoric for most of this year, the only complaint now is that you can't find any properties to sell to 10 buyers waiting to buy. That's not good!

I blogged about my worries, but month by month our market improved.

And here we are, skyrocketing prices, all time high prices on TREB and still people are buying.

When will it end? Maybe it won't, maybe it will just slow down a little and come back to a more 'normal' marketplace. Only time will tell, but be careful.

I wish you all the best!
Mark

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