Peachland Mortgage Broker

images-4In the summer of 2002, the agile Dominican superstar Alfonso Soriano became the first New York Yankee in history to notch 30 home runs and 30 stolen bases in a single season. Soriano broke another record that year: He was the first Yankee to strike out 157 times in a season. Asked to explain his habitual wild swings, Soriano produced a great line: “You don’t get out of the Dominica by taking pitches.”

There are lots of other lines about investing in stocks and real estate.  You can’t time a market.

The truth is they were lucky. If we really understood statistics we would know that in all systems someone has to win at some point.

So what is my point today?

Don’t try to time the real estate market. There are too many variables.  In a balanced local economy real estate will match inflation.

In down years it tracks below the inflation rate, but eventually it will catch up and hence a boom.

This also works in the inverse. A year where prices exceed the inflation rate invariably turn to a down market as the price revers to the inflation trend line.

What does this mean for Vancouver and Kelowna respectively? Vancouver has maintained its trend line with inflation over the past few years and maybe exceeded it slightly.  The Vancouver Real estate market is probably flat for 2012.

KELOWNA has been below inflation for 3 or 4 years and is probably headed for an upward correction in the next year as inventories decline and building permits stay low.

Kelowna Mortage Broker – Bank of Canada

kelowna-mortgage-brokerAs predicted the Bank of Canada will keep rates low for the foreseeable future. This is true as well for a

Kelowna Mortgage Broker.

This policy combined with the (apparently) slowing demand in the residential real estate market will create an excellent buying opportunity for those wanting to own their homes. According to the bank the wild card in their policy choice is the US economic recovery which is well documented by the US real market blogger, Calculated Risk.
The real problem for the BoC is they are caught between a high dollar, export demand and imports such that they are dammed if they do or dammed if they don’t.
If they raise rates, especially increasing the differential between US rates and Canadian rates then there will be a rise in the Canadian dollar vs the US dollar which will damaging Canada’s vital export industries. In addition, as the dollar rises, imports become cheaper. Much of Canada ‘s inflation basket is made up from imported goods so the inflation number goes down, which pushes the need to raise rates back down.

Kelowna Mortgage Broker

Confused? Well the bank is a bit too. And we haven’t even factored in the tight mortgage lending policies that the Finance Department and OFSI have forced on lenders that are causing a major slowdown in the construction industry in Canada. Residential construction is a major economic driver for the Canadian economy and its loss will put further downward pressure on any plan to raise interest rates. To bring this into focus for the ordinary homeowner, all that this means is there is little push on the BoC to raise rates ahead of any move by the Feds in the US. They have committed to keep rates where they are until 2014. So despite the few disclaimers in the BoC’s policy statement, the truth is rates are going nowhere in the foreseeable future and if things don’t get going in the near term, we may even see a rate cut.

Kelowna Mortgage Broker