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rob carrick

Housing markets across the country are starting to highlight the weakness of basing your investment plans on home ownership rather than investments.

Vancouver, Hamilton and Toronto are running hot, and a few markets like Ottawa and Winnipeg are more or less flat. But from St. John's to Calgary, there are cities where prices were down on a year-over-year basis in October. If you bought a house to build wealth, you're facing some resistance in these locations.

The housing markets outside Vancouver and the Toronto area have seen a few momentum shifts in the past few years, and it's possible that more gains are ahead. But with mortgage rates ticking higher this week, it's even more likely that further weakness lies ahead. Historically low mortgages rates are the intravenous drip keeping our housing market going.

Speculation like this would mean nothing if we all viewed houses sensibly – as a place to live, raise a family and be ourselves. But after decades of impressive price gains in many cities, housing has gained a reputation of being a much more reliable investment than stocks.

There's a reality check coming, though. Never mind a sharp correction – house prices could dip modestly or stay flat for a period of time. There are many possible outcomes where houses fail to appreciate enough over time to be in any way considered an investment.

If you've been directing money into your mortgage instead of investing in a diversified portfolio of stocks and bonds or GICs, then it's time to reassess. Hedge your bet on real estate by building other investments that you can use for retirement and other financial goals. Today, mortgage rates are widely below 3 per cent. You can reasonably expect 5 per cent after fees if you hold a diversified portfolio for 10 years plus.

A sound plan for home owners is to make accelerated biweekly payments, thereby chopping a few years off the standard 25-year amortization. Then, commit to investing at least 10 per cent of your gross pay for the future. Own a house, sure, but don't base your entire investment plan on it.

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