The Property Ladder
Bottom line; home prices were too high and fewer people could afford them. A correction is needed to bring prices back within the affordability range of most people. It’s called a property ladder for a reason. If no-one can get on to the bottom rung (which has been the recent situation) then no-one else can move up the ladder. Property prices coming down to levels that allow first-time buyers into the market is a good thing for all of us (apart from people who bought at the peak and need to sell soon, but even they will be able to buy a replacement place for less).
In looking at your house price; a good analogy would be an investment of, say $1.00. Over the years and in the good times, that increases to $20.00. Life is good, investments are good, the jobs are there, salaries are good; let’s spend (that’s what makes the world turn). However, this cannot continue; historically these ups and downs occur and now there is a blip on the horizon; the investment of $1.00 which went to $20.00 has now decreased to $15.00 and perhaps even $10.00. But, hey, you are still above your initial investment! It may not be what you would’ve realized in the last couple of years but you are still ahead.
Unfortunately, if you did purchase property in the last year or so, I hope that it was for long term use and not for a step up the ladder. In this case, you will need to sit tight and see where things are going to go. There are all kinds of predictions floating around but until we know where everything falls in relation to job losses, consumer confidence, government bailouts, etc. a fairly recent homebuyer just needs to take a step back (or take a loss)!
On the bright side for some people, the house prices are lower, the interest rates are lower and we do have the benefit of having Bruce Power here in our corner of the world.
How low can they go; I do not know but hopefully when we do see that plateau, the Buyers will start the process and get the market moving a little.
