Weekend Reading – Housing market predictions

Weekend Reading – Housing market predictions

Hey folks!

Welcome to a new Weekend Reading edition about housing market predictions.

Before we get into this week’s theme, here are some of my latest posts:

Are you passive or active? Some say the passive vs. active investing debate is “dead”.

Well, I’m not one of those people who say investing has to be this or that. Check out my thoughts in this article here. 

I wrote about the Top Canadian Dividend ETFs you might consider owning for income and growth. To help fight some inflation, you probably need both. 

Weekend Reading – Housing market predictions

What a difference a year makes…

This time last year, in yet another wave of the pandemic no less, housing prices were skyrocketing across the country. But things have changed.

Canada’s housing market saw a slowdown in sales during the month of April 2022 as rising interest rates have curbed homebuyers’ thirsty real estate appetite.

For April 2022, the average home price in Canada’s housing market was $746,146, up 7% from last year. While Canada’s average home price has risen by over $50,000 in the span of one year, home prices have fallen compared to the previous month. March 2022’s average home price of $796,068 means that the average home price in Canada has fallen by over 6% in just one month.

In fact, after breaking through the $1 million mark for the first time in February 2022, the average Ontario home price slumped back down to $985,354 in April 2022. Ya, a 6% month-over-month drop from March 2022. Mind you, the average home price in the GTA was still well over a million at $1,254,436 in April 2022.

In a recent Zolo article, there are a host of housing market predictions for the rest of 2022. For my province, the results below seem very consistent to what I’m reading elsewhere – click the image below for the article and your provincial sentiment:

Reference:

“In the past three years, the real estate market has seen record-high prices, a consistent seller’s market and plenty of bidding wars. For that reason, many first-time buyers feel locked out of the market. So when it comes to 2022 housing market predictions in Canada, we surveyed to determine what they think will happen and how it’s impacting their decision to buy — or not.”

If I had to make a guess for later this year, where the housing market is going, I would say the following:

• Expect real estate prices (that have been inflated too high for too long) to come down this year, maybe down another 10% from where they are now. 
• Expect the cost of owning a home to go up, with inflation running hotter and with borrowing costs going up as well. My friend Robert McLister, a respected mortgage analyst and expert, was recently quoted that for the first time since 2010, nationally-available uninsured 5-year fixed rates are all above 4%. McLister also recently referenced some TD research that estimates 5-year fixed rates have increased 140 basis points year to date, which equals about a 12% decline in affordability for the average homebuyer.
• Expect people to complain about the combination of higher inflation and higher interest rates since many people feel they didn’t see it coming.

Of course, the latter point is hardly a prediction since we’re seeing that now.

Anyone paying any moderate attention to our economic climate over the last 10 years would recognize what I call an “upside down world” has been happening: a screaming bull market has occured, during a once-in-a-century pandemic no less, supported by uber-low inflation, supported by non-existent borrowing costs, supporting by government stimulus and money-printing, triggering lots of encouragement to take on debt, be and stay leveraged, and enjoy lots of money most people don’t make. 

I think that’s all coming home to roost in the next few years.

What’s your take on the housing market now? Where do you think it might go? 

More Weekend Reading…

How much real estate should you even have in your portfolio?

Why the housing market is more important than the stock market – at least right now.

Inflation is running hotter and likely to increase even more in 2022. Expect it. So, how can you take advantage of inflation in your portfolio, with higher interest rates to combat it? Here are three great ideas.

Diversification is always helpful in your portfolio since some sectors (i.e., real estate) don’t always correlate with others. Dale Roberts from Cut the Crap Investing updated his ultimate asset allocation ETF portfolio page. 

While I do like one-ticket ETFs for many investors that don’t have the desire to own individual stocks directly, I must say, I do enjoy owning individual stocks directly 🙂

Here are some big bank raises I received this week for being a long-term shareholder in these companies:

• CIBC (CM) raise by 3%.
• Bank on Montreal (BMO) raise by 4.5%.
• Bank of Nova Scotia (BNS) raise by 3%.
• Royal Bank (RY) raise by 7%.
• National Bank (NA) raise by 6%.

What? No raise by TD…? Nope, but they raised their dividend back in December 2021 by a healthy amount. All good people. Dividends are just part of total investing returns. 

Here are some interesting money lessons from athletes and celebrities.

I had a good laugh at this one:

“Taylor says, “If I’m making $2 to $3 million a year, I don’t care about spending $1,000 at a restaurant. I don’t care about buying 2,000 pairs of shoes because I’m making that much money. But the real challenge is sustainability. It’s something that plagues not only athletes and entertainers but the common man and woman as well.”

No, the common man and woman does not spend $2,000 on shoes…some better writing and context needed here!

When it comes to money management, I think you should save like a pessimist and invest like an optimist, meaning be aggressive with equities. Have a read of The Psychology of Money for many other money management tips to live by.

Our Life Financial shared her way to build a defensive but also very smart income-oriented retirement portfolio.

From Melissa: “Start early, reinvest those dividends, grow your portfolio and your income will follow. When retirement comes, you can use the dividend income to offset your living expenses without much worry. That’s being defensive.” Amen. 

This portfolio manager isn’t buying bonds and hasn’t done so for decades.

Here are the top Canadian REITs with thanks to Stocktrades.ca.

Congrats to Tawcan on his very impressive dividend income update for April 2022.

From Bob: “Payments from these 19 companies added to $4,283.52. This marked the second time this year we crossed the $4,000 dividend income per month milestone! I suppose the next key milestone for us is hitting $4,500 per month.”

Dividend Strategy believes most disciplined dividend growth investors shouldn’t worry about inflation. 

Tiny Thought for the Week:

The greatest threat to results are boredom and impatience.

In our world of instant gratifcation, we glorify results. We don’t give nearly enough praise to the process and the folks that follow them to realize their goals. 

The difference between good and great results is often found in consistently doing the boring things you know you should do exactly when you feel like doing them the least.

(Share this Tiny Thought on Twitter)

Read more at Farnam Street, outstanding content.

I’ll be back next week to hopefully answer a reader question that might apply to you as well!

Have a great weekend!

Mark