What Happens if the Market Crashes?

Let’s talk about a question our clients ask us whenever the market is super hot. It’s easy to think that it’ll keep going on forever, but what happens if the market were to slow down in two years’ time? What should you do when prices begin to dip?

If living in the home you own and prices have gone down, there’s no real impact on you. You have a home, you have a roof over your head, you’re going to continue paying your mortgage and you’re going to be okay financially. If you were planning on selling or refinancing at that time, then obviously you’re going to be a little further behind than you expected.

In my opinion, we’re going to see prices go up for the next little while. So, even if there were to be a slight correction, you’d probably still be in the money.

The reality is that we live in Canada, and Canada is a very left-leaning country economically. Because of that, in my opinion, they’re unlikely to spike interest rates on us very quickly. 

It wouldn’t be in the government’s best interest, because if they were to do that, unemployment rates would go up due to some companies shutting their doors, and the government of Canada would need to absorb that unemployment. At the end of the day, they’d have to take money from the right pocket to feed the left pocket, and I don’t think that makes much financial sense.

So, are we going to see an increase in interest rates? Definitely. They’re at 1.45% variable and 2.30% 5-year fixed, which are still historic lows. I keep looking back on January 2019, when we had interest rates at about 3.8%. And I think that in the next 5 years, we probably will get closer to those numbers again, because the government will be looking to balance out the market.

Your reaction to all of this will boil down to a game time decision.

If you need to make a move, then obviously timing is everything. Whenever it comes to any financial instrument, whether it’s stocks, real estate, a business, whatever it might be, timing is kind of the most important thing.

So, timing in the market is not really going to be in your favor. But if you can hold off for just a bit, you’ll probably see the market go right back up within a year or year-and-a-half. Because if there is a correction, it’ll be for a very short period of time.

Want to dig even deeper? Get in touch with our team and tell us about the decision you’re facing – we’re always armed with advice and insights, and we love to chat about real estate!

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