We've just entered February and I've already heard from multiple sources that sales activity is tentatively on the rise. In fact, home sales have posted the strongest monthly gain since April 2023.
However, markets are definitely wrestling with volatile inflation and macro data, and rate cut projections have pared back a bit since Dec. 2023.
It seems everyone is planning on Canadian interest rate cuts in the very near future, and it makes me wonder if there is anything we are missing here. While (responsibly) leveraged investment real estate still seems to be one of the best wealth growing vehicles available, the recent volatility has me treading lightly. Any strategy that relies solely on price appreciation and rate cuts to be viable should be evaluated very carefully.
One of Ontario's largest landlords and a well respected mortgage broker are in the news this week as the corporations behind $144 million in unpaid loans has filed for bankruptcy protection due to properties being financed on future market value at over 100% LTV. The directors point to tenant issues and interest rate increases as being the main reasons behind the insolvency. A still very broken landlord tenant board (though slowly improving) will continue to be a challenge for Ontario landlords.
The above anecdote is proof that leverage is a powerful thing if used properly, however as these investors are finding out, over leverage can be a portfolio killer. I've always found it to be beneficial to follow my own path, and think twice about following the masses. I still think it is very likely that rate decreases are coming this year, but a few surprises to the upside in inflation could definitely push those cuts down the road, especially if a strong spring market has prices running away.
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I'd love to hear your thoughts on this! Have a great week while working past those obstacles on your climb to success. Let's Grow Together!
Real Estate Investor and Entrepreneur
Jonathan Beam is a real estate investor in the Niagara region who is passionate about helping you achieve financial freedom through real estate. He works with new and experienced investors to formulate a plan that fits your specific situation and provides market guidance and consultation on the best places and strategies to pursue within the Niagara Region. Book a free, half hour no obligation consultation to see how he can help you to achieve your goals. His travels are available at www.realestateandrepeat.com
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