Value of buying whatever the market.

It is interesting, this week I heard from some realtors, one side said things are normalizing and sales will move slower and others remain confident that the hot properties will disappear in days.  I guess really it comes down to what the seller expects in price, bidding war with high expectations or OK with something closer to the most recent sale in the area?

There are more articles out than usual about the state of the market.  The naysayers and the "keep the optimism going" crowds battling it out for the hearts of the public.  I know that any spin can be put on most of the numbers that are out there, but it does seem to me that the drop in sales is real and if prices drop OK.  I do like the piece by Gail Johnson.  Basically it supports buying a home in any market, assuming you are planning to stay.   The interest rates are low and it is a hard deal to beat.

I was thinking about people buying homes in the 70s, since then we have had some pretty mad swings in the market, but think of this example.

If in 1972 someone bought a home in Toronto for $125,000, today, according to the Bank of Canada calculator, that amount would be $685,810.81 (love the pennies), if nothing major is done to that house over all those years other than maintenance, repairs, paint, carpet, roof, new heating and cooling etc.,  the house might be worth some $2 million on the market today.  In the meantime, the family would have had a house to live in, bills to pay and maintenance.  I somehow do not think that the cost of maintaining the home exceeded the $1.31 million markup plus the rent they would have paid had they not bought the house in the first place.   So they would probably come out ahead.  Therefore, I tend to agree, buying a home is worthwhile if you plan to stay, flipping has risks and sometimes things happen that cause people to move for work or personal reasons, but even that might get worked out if the buying and selling are happening in the same up or down market. 

OR Look at things another way.  Allowing strictly for inflation a house bought in 2005 for $450K, would now cost $509,860.47, now the actual value of the house because of the recent boom years means it is probably closer to $630,000, again without major renovations.  It would mean clients would have to save almost $200K in 7 years, now while possible for some not always feasible. 

Why are you considering a home?  What are your long term goals, if you are looking longer term but worried about a drop in the value, then consider houses that can be renovated down the road to accommodate the changing needs of the family.