Is it a good idea to sell and rent?
NO! NO! NO! I've been hearing a lot of home owners including some colleagues in my industry believing our market has topped and are considering selling now when the market is still high(according to their own definition), then rent a while and wait to buy back when prices are lower. It seems that all of a sudden these people have a crystal ball and like the stock market are trying to sell high and buy low. This is one of the reasons why all of a sudden we have inventory is high pushing prices down. I understand why some of the real estate speculators need to sell because they have stretched their financing to the max and they have no choice but to sell. However, as a home owner, unless you are upgrading, te idea of selling, renting and buying back into a lower market is a highly risky.
I have seen this in the last wave back in the 90's. I personlly know a few acquaintances that did and ended up never being able to buy back. Their money keep depreciating and the house prices kept going up. Whenever the cycle happens, home owners during that time ALWAYS believe the future market cannot surpass the present one but it happens over and over again. The market since 2000 has proved them wrong. I'm now hearing the same comment again and I believe the market will prove them wrong again in the coming future. Once again, we won't know when the market hased peak and when the market has bottomed out until after years later. A CMHC economist appeared on TV yesterday and he stressed that the Canada Housing Market is totally different from the US market. However, it is true that the US economic slow down does have some affect on our economy. He mentioned Calgary is definitely a buyer's market and BC market is rebalancing.
If you pay attention to the news these days, the US inflation has been the highest in 17 years. They might no choice but to raise interest rates to control the inflation, which I've already mentioned last week. Let me share my analysis with you by using $500,000 property as an example, if the rate increase by 1% from 6% to 7%, you will be paying $24,000 more in interest per year for a 5 year closed mortgage which ends up $121,000 more in interest in total. Even if the property values fall by 10% to $450,000, think of all the extra interest you'll need to pay to the bank, the cost of buying and selling plus the rent you'll be paying for all those months or easily turn out to be years which basically goes down to the drain. Does it really make sense for you to make this move at all? The market needs to fall approximately 25% before the idea works.
Well, this is the reason why I don't agree with the sell and rent idea. However, at the end of the day, it's how much risk you are willing to take. Remember, "timing the market" is for speculators but for home owner's it's "time in the market" that counts.
NO! NO! NO! I've been hearing a lot of home owners including some colleagues in my industry believing our market has topped and are considering selling now when the market is still high(according to their own definition), then rent a while and wait to buy back when prices are lower. It seems that all of a sudden these people have a crystal ball and like the stock market are trying to sell high and buy low. This is one of the reasons why all of a sudden we have inventory is high pushing prices down. I understand why some of the real estate speculators need to sell because they have stretched their financing to the max and they have no choice but to sell. However, as a home owner, unless you are upgrading, te idea of selling, renting and buying back into a lower market is a highly risky.
I have seen this in the last wave back in the 90's. I personlly know a few acquaintances that did and ended up never being able to buy back. Their money keep depreciating and the house prices kept going up. Whenever the cycle happens, home owners during that time ALWAYS believe the future market cannot surpass the present one but it happens over and over again. The market since 2000 has proved them wrong. I'm now hearing the same comment again and I believe the market will prove them wrong again in the coming future. Once again, we won't know when the market hased peak and when the market has bottomed out until after years later. A CMHC economist appeared on TV yesterday and he stressed that the Canada Housing Market is totally different from the US market. However, it is true that the US economic slow down does have some affect on our economy. He mentioned Calgary is definitely a buyer's market and BC market is rebalancing.
If you pay attention to the news these days, the US inflation has been the highest in 17 years. They might no choice but to raise interest rates to control the inflation, which I've already mentioned last week. Let me share my analysis with you by using $500,000 property as an example, if the rate increase by 1% from 6% to 7%, you will be paying $24,000 more in interest per year for a 5 year closed mortgage which ends up $121,000 more in interest in total. Even if the property values fall by 10% to $450,000, think of all the extra interest you'll need to pay to the bank, the cost of buying and selling plus the rent you'll be paying for all those months or easily turn out to be years which basically goes down to the drain. Does it really make sense for you to make this move at all? The market needs to fall approximately 25% before the idea works.
Well, this is the reason why I don't agree with the sell and rent idea. However, at the end of the day, it's how much risk you are willing to take. Remember, "timing the market" is for speculators but for home owner's it's "time in the market" that counts.
