Expert Investors watch the numbers very closely. Personal finance in the last 12 months has reminded me of watching a decade play out in the duration of a year. So much drama, it’s almost like watching some of the most intense and harrowing scenes you find in a typical action movie played at breakneck speed. Inflation was one of the worst on record, house prices were soaring, the stock market was hot, and cryptocurrency became more accepted than ever before – despite its crazy ups and downs in price. The economy has also seen some misfortune along the way, including an increase in food bank usage rates and some of the worst housing affordability numbers. But to be perfectly honest, I think we could all do with a bit less drama (if I’m just going to lay it on thick and say everything out loud).
To see whether 2022 is going to be a calm year, we’ll have to look at the numbers. Here are some of the most crucial ones that will determine exactly how things play out:
1. Interest rates
The Bank of Canada overnight rate is hovering around a historic Low The loonie has been crashing against most currencies. As a real estate investor if you have a variable-rate mortgage you may be able to stick with it despite rising rates because your interest fees will likely rise at the same pace that your minimum monthly payment does! If you have a line of credit, each increase in interest will impact how much money you are required to pay per month towards your account. Variable mortgage rates can fluctuate with these changes as well; this may mean that you end up paying more interest towards your home loan instead of paying off the principal. You will be left with a higher mortgage balance owing than anticipated when you had originally entered your financing plan – meaning that it will take longer for you to pay off your home loan than what was originally expected.ec ullamcorper mattis, pulvinar dapibus leo.
2. Inflation
You may have seen me rant on social media that Inflation is the real kicker. Inflation has the potential to burn a hole in your wallet. Prices have risen on average by 4.7 per cent in the past year, according to the latest figures released by Statistics Canada. The data represents the largest inflation reading since February 2003. When it comes to keeping inflation under control, this rate is obviously quite concerning because it means that consumers will be losing more and more money over time which could inevitably cause your pay cheque not to go as far as it once did! According to recent studies, many people who work at ’normal’ jobs are very vulnerable to rising prices and higher inflation due to their lack of potential for merit raises, or favourable promotions within their company. This is where real estate investment seems like such a good strategy
3. Real Estate Prices
If trends are to be believed home prices may continue to climb rapidly in the next few years. The projected 2021 rise in average resale home prices included a forecast of another 7.6 per cent increase in 2022 to around $739,500 according to research by the Canadian Real Estate Association (CREA). I do hear a lot of folks sharing the popular opinion that rising mortgage rates may slow price increases. When you consider rising rental costs combined with an array of other challenges, including rising mortgage rates that continue to climb in many cities Canadians are finding it a challenge to find affordable, long-term housing.
4. Bond yield
Fixed income instruments specify a fixed rate of interest over a predetermined period. Federal government bonds are one such commonly used class of fixed income instrument that is issued for a specific amount and for a specific length (or term) of time. The long term trend in the yield on federal government bonds is an important factor in determining what mortgage rates will be charged in the next several years. For example, if you’re looking to buy or renew your existing mortgage from one year to the next, you should know what this trend has been in the past. We have seen the 5-year Canada bond yield rising for most of 2021 except towards the later end of the year due to rising concerns from the Omicron variant.
5. Stock Market Trends
If you have seen your stock portfolio surge in 2021 and don’t think they will last, now may be a good time to consider taking some profits and laugh your way to the bank. The pundits are predicting with some confidence that stocks may rise in 2022 as the economy splutters back to normal levels of activity but I have seen stock markets go bananas …anyone remembers 2008/2009?
Benchmarks for the S&P 500 and TSX Composite Index have risen over the past few years, and these numbers are causing experts to become excited, as they have not experienced such growth rates. That said, some gains can’t hurt though; taking some profits on these positive investments may give you enough ammunition to achieve a positive personal finance scorecard in the year 2022.
So, these are some numbers that may impact your real estate goals in 2022 are you watching out for any other? It goes without saying that it’s important to keep your goals in mind and optimize your strategies real time to come out as a winner in these changing situations. If you need to bounce of some ideas, review trends or address any concerns, let’s connect.
Afterall, as they say 2 minds are better than one.