Predictions For 2011

by Darrin DeRoches December 9 - 15, 2010

The year is coming to an end and this is the time all the experts start coming out with their predictions.  In the beginning of the year they were saying we could lose up to 21 per cent of the value of our real estate market. In fact we rose 4–5 per cent this year, depending on who you listen to.  So when we look forward into 2011 we can again do it with skepticism. The good thing is we are leading the world in recovery.  It may not be happening as fast as we would like, but it is happening. There are countries like Greece and Ireland that are having a lot of trouble, but here in good old Canada we are going strong.  And more important, we do not have any troubles on the horizon like our good neighbours to the south; the real estate market in the States still has a bleak outlook.  The chief economist for CIBC World Markets, Avery Shenfeld, states  “…about 11 million mortgages in the U.S., which is one in every four mortgages, is worth more than the house it is written on and about half of those are about 20 per cent above the value of the house.”  So these mortgages will be coming due in the next three to five years and only half are at 20 per cent, so I would say time will take care of these problems.  5 million could be about 5 per cent over value, which will be absorbed in the coming years.  So the 5 million, or one in every eight mortgages are 20  per cent or mor over the value of the property will cause some losses in the coming years.  These losses should be absorbed in the profits of these banks, plus in other statements the economy is growing at 5 per cent, so it should be a wash.     So the future may not be all that bright, but things are recovering.  In other predictions, the experts are still saying the real estate market in Canada will drop by 10 per cent in the next couple of years.  It is a far cry from the 21 per cent they said we were going to lose at the beginning of the year, and now 10 over two years sounds pretty easy to swallow.  The point is this may happen in the overinflated markets of Vancouver or Toronto and it will have an effect on our bottom line.  If I were to predict the real estate future of our market, I would say it may flatten to minimal increase of 1 to 2 per cent – but who am I to predict?  If you want to buy cheap condos in Florida, the deals are there and will be there for awhile.  Ask your parents about the deals they could get in Florida 20 years ago – it was called swampland. There will always be deals in Florida: buy local and keep our economy strong.  As David Bowie sang, “I’m afraid of Americans.” V                Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.