In the wake of the COVID-19 pandemic, the housing market turned into a frenzied gold rush. Investors jumped in, snatching up properties with dreams of quick profits as house prices skyrocketed. But the tide has turned, and for some, it has brought heavy losses, up to $200,000 per property in some cases.
Now, the big question for these investors is: Should you hold on, or is it time to cut your losses?
How Did We Get Here?
After COVID, government stimulus packages, low-interest rates, and pent-up demand caused house prices to skyrocket. Investors, driven by optimism and the promise of continued growth, purchased properties at record-high prices, believing the boom would last indefinitely.
However, the market faced a turning point. Interest rates surged, increasing borrowing costs and cooling buyer demand. At the same time, changes in immigration policies aimed at addressing housing shortages further shifted the dynamics. While reduced immigration eased pressure on housing demand, it did not fully counterbalance the effects of rising interest rates and over-inflated prices. What once seemed like a golden opportunity turned into a financial challenge for many investors.
Losses That Sting
For many investors, the bubble burst harder than expected. Some who bought homes at peak prices have had to sell at massive losses, up to $200,000 below what they paid. That’s not just a blow to the wallet; it’s a hit to confidence, leaving many wondering whether they should sell now or hang on in the hope of a rebound.
Why You Should Consider Waiting
Real estate is often a long game. Here’s why it might be worth holding on to your property:
- Easing Mortgage Rates: The government is loosening up on mortgage rules, and interest rates are starting to come down. Lower rates could encourage more buyers to enter the market, boosting demand and possibly stabilizing prices.
- The Immigration Factor: While immigration levels have been cut, it’s only a short-term adjustment. By 2027, policies could shift again, bringing more newcomers and driving housing demand back up.
- A Balanced Market in the Future: Experts predict the market will stabilize once inflation cools and the economy steadies. If you can hold on for 3 to 5 years, you might recover your losses or even turn a profit.
But There Are Risks
It’s not all sunshine and rainbows. If the economy slows or if housing supply continues to rise faster than demand, prices might stay low for a while. For heavily leveraged investors, those who relied on big loans, holding on might feel like a financial squeeze, especially with high monthly payments.
What the Experts Say
Real estate analysts suggest that for most investors, patience is key. “Selling in a downturn locks in your losses,” says market expert John Peterson. “If you can afford to hold on, the housing market usually bounces back over time.”
But this isn’t a one-size-fits-all answer. Your decision depends on your financial situation, the local market where your property is, and how much time you’re willing to wait.
How Long Should You Wait?
Most economists predict the housing market could stabilize within 3 to 5 years, but recovery might come sooner in high-demand areas like Toronto or Vancouver. If you’re in a smaller city or rural area, it could take longer.
Bottom Line
For investors who took a hit during the housing boom, now’s the time to think carefully. Selling at a loss hurts, but for those who can hold on, the market might eventually reward your patience.
So, should you wait? If you’re not drowning in debt and can manage the holding costs, the answer might just be: Yes, but buckle up for a long ride.