Home Buying fence sitting may be a pain in the wallet

Submitted by Phil McDowell on Tue, 03/16/2010 - 09:56

As a potential home buyer or investor, we all have been riding a picket fence of economic data, forecasts and opinion.

Often the same single article will raise you up and dash you down.  It's like sitting on a picket fence.

Take for example a few of the Royal Bank news releases issued in the first half of the month of March.

March 1- Headline: Albertans most upbeat about their personal financial situation (up); but, in same release "29 percent say they or someone in thier household is worried about job loss" (down).

March 8- Albertans most interested in homebuying compared to other Canadians (up)

March 11- Alberta's economy is forecast to grow by 2.5 per cent in 2010, falling short of the 3.1 per cent national average- Alberta is lagging (down), but capital spending in energy and government will increase in 2010, and Alberta expected to grow 4.4 per cent in 2011. (up)

March 15-"The downturn in the housing market has created a large surplus of homes available for sale.  This has held back the pace of price increases.." (down)

So, we have picket fence of up and down information, which has caused a number of potential buyers to sit on the fence.

Fence sitting will hurt soon because consumer confidence is increasing which leads to spending.   Increased spending has an inflationary pressure and that means higher interest rates.

Real estate statistics from the Calgary Real Estate Board for February for single family homes showed that comparing the ratio of sales for the month to the active listings at month end- the ratio was 33%.   In 2009 is was 19%, and in 2008 it was 25%.   The supply side, the sellers, is starting to improve for the sellers.  That puts prices up.

Moral of the story:  increased employemnt and consumer confidence is putting more weight on the odds interest rates will rise.   More confidence means more people looking actively to buy and that reduces inventory, putting pressure on home prices to rise.

How much pain can your wallet handle while you sit on the fence?