REAL ESTATE MARKET UPDATE

By Dino Nicosia, Broker of Record, Investpro Realty
Jan. 2009

In these uncertain economic times, the message from the media has been focused on the gloom and doom as a result of the stock market crash and how the real estate market is slated to take a tailspin in 2009.

What the media fails to recognize and properly relay to the public is that there are two mutually exclusive sectors to the Real Estate market, both of which are influenced by different factors.

1. The residential home market: This sector is influenced by consumer confidence and affordability (unemployment). If you become unemployed and you no longer have a decent income, it really does not matter how low interest rates drop; you simply cannot afford the payments without a good paying job. If you are still employed and are considering buying a home, the lack of "consumer confidence" will likely prevent a purchase in the near future. This will have a negative impact on the residential market.

2. The investment market (mainly multi-residential properties): This sector is influenced by income generated by these properties. The current drop in interest rates will enhance the income to make the investment property more viable and attractive. The major negative influences with this market would be a large vacancy factor and rising interest rates. Both are not the case today. If you have a fully occupied building or even one with a moderate vacancy, you will not be influenced by the economic downturn. As a matter of fact, the downturn in the economy will enhance this sector, because those people that lose their homes will most likely turn to the rental market. Furthermore, the renter who was considering buying their first home will delay their purchase and remain a renter until economic stability and confidence is revitalized.

The following article from CMHC (Canada Mortgage and Housing Corporation) elaborates on the two sectors of the Real Estate Market as referenced above.