Other Factors to Consider

"Housing slump deepens as prices drop most in 26 years", reads the headline in today's Globe & Mail in reference to the Canadian housing market

Price is certainly a factor in making home and investment decisions, and the decline in house prices across Canada is big news. However, price should not be the only decision in buying or selling.

The key factor in making decisions should actually be what your objective is with the property under consideration. Is it a principal residence, an investment, a retirement residence etc?

A second key factor is how much it costs to carry the property, including the mortgage, taxes, other fees etc. Lets say you have a property that is dropping in price but has a very low mortgage rate of say 4.5% good for 7 years. Selling that property, but then buying it back in 5 years for $100,000 less may end up costing you more if the best mortgage then is 9%.

There is a new consideration which also may impact on today's decision. Ten years ago, banks provided only token home-equity loans. But five years ago, home equity loans became easy to get, at very favourable rates. But those loans have all but dried up today. However, some people who got their loans over the past 5 years have huge available lines of credit, at rates that are very low. Rather than selling a property to pay off other debts, it may be advantageous to rely on the line of credit in the short term.

Real estate is a long term business decision. And there are a lot of factors to consider.