Real Estate Outlook and Interest Rates

The Bank of Canada yesterday left interest rates alone. Based on the performance of the real estate markets in British Columbia currently they probably should have done exactly that... BUT! in the ROC property values are in the dumper and the economy is slowing rather quickly! The need to keep inflation under control is what is balancing the demands of the economy for liquidity, and with the rapid run up in the cost of energy and other commodities over the past couple of years, who can argue that inflation isn't a problem.

So, we have stagflation.... something totally familiar to those of us who survived the late 1970's only to go in to the crash of 1981. Anyone who lived through the crazy inflation of the late 1970's never wants the government to allow that level of devaluation of the monetary system to occur again.

So it sound like I'm endorsing the current policy by the BOC of doing nothing. Hmm... maybe I am, after all. It could be worse, we could have inflation threatening double digit inflation, or perhaps US style declines in house pricing. As it is, what we have is a bit of the economic flu, with a touch of stomach upset.

Take a couple of pills, roll over, and sleep until morning (or until 2009). Things should look better by the later half of 2009.

In the meantime, invest in mortgages and MIC investments to protect your income and your capital, and leave the volatility of the real estate markets to someone else.