http://www.canada.com/vancouversun/news/business/story.html?id=1c317af2-9537-4de6-8721-875c1c0c7d49
SummaryThis article reports that the declining prices in British Columbia’s high priced Vancouver, Kelowna, and Fraser Valley housing markets has helped to decrease the average cost of Canadian homes by 6.2 percent, compared to September of last year. British Columbia’s housing market is expected to decline even more due to the low consumer confidence. The Canadian Real Estate Association suggests that the low consumer confidence could be related to the elimination of mortgage-insurance availability for buyers with less than a five-percent down payment and 40-year amortizations. The Canada Mortgage and Housing Contractors estimates that 15,663 new units of residential units have been built since the beginning of the year, a five percent increase from the amount built at this point last year.
Connections
I connected this article to the balance sheet part of the chapter. With the housing market declining, assets in a balance sheet will be declining as a result. The decrease in the assets will lead to the equity section of a balance sheet to decline. Residential properties that were listed at high prices in the balance sheet are going to have to be cut down to lower prices. Cutting down these prices will result in the property account in the assets to decrease. The equity section of the balance sheet will decrease based on how much money the property account declined by. Real estate businesses will be affected the most because they own a large number of residential units. Owners of these real estate businesses will have a hard time observing comparative balance sheets as their equity and assets have decreased quite a bit.
Personal Reflection
With the housing market dropping in Canada, residential units are dropping in price also. I predict that in two to three months, consumer confidence is going to be high again when potential buyers see these low prices and want to take advantage of these deals. The high consumer confidence will cause the housing market to increase once again. At this point in time, I would recommend buying a house if you have the money saved up. Waiting for lower prices could actually backfire and cause you to lose money, as prices will eventually rise again. I predict real estate businesses are going to wait for the consumer confidence to get high again, and then start selling their residential units.
Harman Basra
Financial Accounting 12
Block A
1 comment:
Harman, I believe some of your logic seems quite valid; however, I have some different opinions on your article. An item in the balance sheet, this particular issue will really affect is one's equity; if house prices continue to fall to levels like in the U.S., then mortgages will be worth more than the actual value of the property. My personal opinion is that the housing market will not rebound very quickly, because the rise in prices was mostly based on speculation, and due to the current financial crisis, mortgages are going to be much more difficult to qualify for (especially if you have a low down payment). Another major factor will be interest rates, as it is hard to tell whether they will go up or down. All we can do now is just wait and see what will happen; because the BC real estate market has seen the "bubble burst" [housing prices got really high, and then drastically fell].
Post a Comment