From my last article, I had some good discussion with multiple people where the “peak” of the market is going to be. That’s hardest part to tell.
If we look at the historic data that happened from last crash, I attached the picture again below for reference. It peaked in 1989, but 5 years prior, it gone up 167.5% in price. We’re probably somewhere within those years now…I just don’t know which year.
In 2016, the average sale price on TREB was $729,918. That was up 17.3% from 2015. And from 2014 to 2015, it was “only” 8.3%.
Back when it peaked in 1989, the average sale price growth was 18.9% the prior year to the peak and 21.4% the year before that…so are we close?
Obviously different type of markets then and now. There’s no indication of any slowing down. Supply is still low while demand is high. Immigration is high. Interest rates remain low while the government can’t do anything about it. Also no sign of any major mortgage rule changes that could affect.
Will foreign tax or these ‘vacant’ tax do much? Probably not. The foreigners that are moving money out of their own country are already wealthy to begin with and the rate that where their money is devaluing is higher than the tax itself. So if you tax these people, it won’t really slow it down for long.
Let’s think worst case. Say this year is the peak and if we assume history repeats itself…the prices dropped 38.1% over the next 7 years to bottom out in 1996, and it took another 6 years for it to recover back to where it peaked in 1989.
That means the average price could potentially bottom out to about $451,819…or around 2011 prices.
Those people who are complaining about high prices, they can’t afford anything etc…can they afford this price now? If they didn’t buy in 2011, is it likely they’ll be able to buy when the market crashes?
Again, a lot of these questions are nearly impossible to answer. But we can prepare ourselves.
- It’s a great time to sell if you want to cash out.
- If you’re buying, be patient. There’s a lot more demand than supply, but have some justification in the prices you pay.
- Keep your living expenses down, live on less than you make and paying your mortgage (even if interest rates go up), shouldn’t be a problem.
- If you don’t need to sell during the crash, then don’t. Hold it and ride it out.
Hope this gives you a real glimpse of what’s going on in the market instead of those crazy headlines you read in the media.