Is Now a Bad Time to Buy Land Part 2
Over the last couple of weeks I have listened to many intelligent people's assessments of where the economy, interest rates, and housing prices go from here. This includes attending conferences, and personal phone calls with people who are pretty respected in the macroeconomics space. In short, I still see a total divide in opinions. One camp thinks that the US will have to lower rates sooner rather than later to keep their GDP growing and preventing their national debt to GDP levels from skyrocketing to unseen ratios, in turn weakening the appetite for their currency and their new bond issuances. This of course would have a net inflationary effect, especially if Canada were to follow suit to prevent our dollar from getting to strong relative to the USD, which hurt our exports. Now before I go too far in trying to explain these theories in depth, as I'm no economist, let me briefly outline the other theory, and then give some basic thoughts. The second camp is of the opinion that, rates are still likely to stay very close to their current levels for some time to come, and are not likely to drop below 4% for the foreseeable future. This would paint quite a different picture, with an emphasis on the lagging effect of higher interest rate increases, which can take 12-18 months to ripple through asset prices. In other words, this view sees rates staying relatively high, and prices still to come down slightly before going sideways for a long time with little to no increase, somewhat like the 90's. SO WHAT DOES THIS ALL MEAN? Honestly, given that these two views are quite different, I think you just have to ask yourself, what situation presents the most risk to you as a land buyer and how to you mitigate it? Situation 1 (lower interest rate environment) presents the risk that right now is the best time to buy land, because many land sellers have been sitting waiting for 6 months or longer, and their hope in striking a deal may be at an all time low. If rates were to go backward anytime in the next 6 months, seller confidence would immediately be rekindled, and most sellers would likely have a renewed resolved to stick with their current list prices.