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You are here: Housing Prices Will Not Stay Low for Long

Housing Prices Will Not Stay Low for Long

Incentives help restore confidence in a declining market, but housing prices will not stay low for long

Buyers should remember they are purchasing a home, not a commodity stock

Peter Simpson
Saturday, November 22, 2008

 

For every challenge there is an opportunity. If a vacation is in your plans, or you are considering purchasing a vehicle or home, there are some sweet deals out there.

Because constant news of a topsy-turvy economy has caused fearful consumers to rein in their purse strings, many retailers have responded with a range of sales incentives.

Tour companies and airlines offer tantalizing prices on vacations to Sunbelt destinations.

Cars and trucks rolling out of dealerships aren't causing any traffic jams these days. In addition to slashing prices on every new vehicle, a dealer is offering airfare and a three-night stay at a Cancun resort. Another is tempting buyers with a free Xbox 360, whatever the heck that is.

Others entice buyers with cash, free gasoline or zero per-cent financing. If free-for-life tires, brake pads and batteries turn your motor, a dealer is offering that exact combination, although the newspaper ad doesn't specify if the generous offer refers to the life of the vehicle or the buyer.

So, it makes perfect sense that home builders are also playing the incentives game as they try to get a leg up on their competition, particularly if they hold standing inventory that is heavily financed.

During the worst of the moribund U.S. housing market, builders were offering incentives such as free Mercedes sedans and backyard swimming pools.

Not here. Yes, there were one or two fringe developers giving away free cars with each condo purchased, but meaningful incentives, such as legitimate price reductions -- some $100,000 and more on larger single-detached homes -- are hugely beneficial to cash-strapped home buyers.

Recently, I have noticed other advertised enticements, such as two-year prepaid monthly condo maintenance fees, and premium upgrade features included as standard in all homes. Here's a very interesting one. A prominent builder of single-detached homes is offering a peace-of-mind guarantee. The ad reads, we are "so confident in our current pricing, that we guarantee if the price you pay today is actually lower in one year, we'll pay you the difference in cash."

Now that's a confidence- builder. This incentive is an answer to those people who fear home prices will drop further for a while longer and have decided to delay their purchases until prices start rising.

FIRST-TIME BUYER'S CHANCE

Just when might that be, pray tell? Noted analysts, just six months ago, were dancing on the don't-worry-be-happy bandwagon. A couple of those same guys now believe the world is nearing its end, and have assumed the fetal position in some dark, clammy corner.

Look, here's the thing. This return to a balanced market allows first-time home buyers to finally climb onto that elusive first rung of the homeownership ladder. Those young folks can take their time to assess their situations, then commit to a home that both serves their needs and meets their budget.

If you are selling a home, then moving up in the Metro Vancouver area, the sales and purchase prices will be relative. Typically, when one value dips, they both dip; when one rises, they both rise.

And if you bought a home during the past, say, six months, and you are fretting that the home might have since lost some of its value, don't let this consume you. As I have said and written many times, your investment is in a home, for your family, not in some short-term commodity stock. Real estate values always come back, and then some.

I am not advocating that everyone should rush out right now and buy a home just because there are great deals to be had, but if a new home is in your plans, now might just be your time.

On my office windowsill is a photo of a codger who appears to be well over 90 years young. The caption reads, "this is the young man who waited for real estate values to come down."

Now, if you are quite satisfied with your existing home because of its proximity to things you value -- family, health care, shopping, spectacular views, whatever -- but you are seriously considering renovating to more closely match your home to changing lifestyle needs, I have another deal for you.

Peter Simpson is the chief executive officer of the Greater Vancouver Home Builders' Association.

© The Vancouver Sun 2008

 

Statistics show that the Kelowna real estate market prices will not stay at this low either.  Prices will go up again.