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The greatest financial unknown in the pandemic is how the housing market will hold up.

The importance of what happens with housing cannot be overstated. A sharp decline in prices would slow the rebound from the current recession and cause financial misery of a kind we haven’t seen in Canada in decades. There would be mortgage defaults and, eventually, foreclosures. Some owners would end up selling homes for less than they paid, an almost unimaginable outcome as recently as a few months ago.

The psychological effect of a falling housing market will also be harsh. How many people stretched themselves to the limit financially to buy a home on the understanding that it would be an investment? How much wealth has been put into housing rather than stocks and bonds because of the perceived potential for better results? A housing shock could trigger a pullback in consumer spending as owners process their loss of housing wealth. That’s the last thing our economy needs right now.

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Forecasts for home prices are piling up, and they vary to an amazing extent. The Better Dwelling blog recently highlighted eight predictions that ranged from a gain of 12 per cent to a drop of more than 30 per cent. Canada Mortgage and Housing Corp., a federal government agency, sees house prices falling between 9 and 18 per cent over the next 12 months.

The stock market plunged in March as the pandemic took hold and has been surging back ever since. Can this optimism carry over to housing? We won’t know until the economic damage caused by the recession becomes apparent in the months ahead. Keep your eye on the unemployment rate in particular. A strong job market, which we had before the pandemic, is the foundation of a strong housing market. If the unemployment rate is slow to decline, the national appetite for home will suffer.

Your best defence against a housing market decline is to stay put in your current home for at least the next five years. That should be long enough to work through any declines ahead and get the housing market back on track for growth.

Subscribe to Carrick on Money

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Rob’s personal finance reading list…

Keeping your summer electricity costs down

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It looks like the pandemic will force a lot of people to work at home for at least part of the summer, and that means air conditioners could end up being used more. Here are some tips for offsetting the extra costs of cooling your house while you work during the summer.

Were your personal finances pandemic-ready?

In her newsletter At The End of The Day, Hannah Sung writes about how a family crisis helped her develop the coping skills to weather the pandemic. Ms. Sung is producing a new podcast called Stress Test that I’m hosting with Globe and Mail personal finance editor Roma Luciw. Stress Test will look at how the basic rules of personal finance were tested in the pandemic. We plan to have the first episode available during the summer.

Best online brokers

A blogger picks the best brokers for low fees, customer service, appeal to newbies and more. For a different take, check out my latest ranking of online brokers.

How to optimize your portfolio in the pandemic

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As part of The Globe and Mail’s ongoing series of call-ins for subscribers, investing editor Darcy Keith and I talked about investing in the pandemic and answered reader questions.

Investment industry 1, client 0

I have met plenty of great investment advisers – smart, ethical people who bring financial security to their clients. But, man, are there ever some hacks, or worse. Choose your advice providers well.

Ask Rob

Q: Is the extra GST credit top up this spring taxable income? I received $51.

A: As background here, the federal government’s response to COVID-19 includes a one-time supplementary top up for the GST/HST credit that was paid in April. This credit is meant to help people with a low or modest income offset the sales tax they pay and is paid on a quarterly, non-taxable basis.

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Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

All about the Canadian Investor Protection Fund, which covers losses in your investment account due to your dealer becoming insolvent.

Video of the week

Keisha Blair, author of the book Holistic Wealth, talks about how women can recognize the signs of financial abuse.

In case you missed these Globe and Mail personal finance-related stories

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  • My husband has been laid off because of COVID-19. How can we stop our panic buying?
  • Some questions every cottage owner needs to answer
  • Gordon Pape: My High-Yield Portfolio continues to hit targets, but COVID-19 has prompted a shakeup (for Globe Unlimited subscribers)

Has the coronavirus derailed your financial plan? Are you worried?

Get some FREE advice from The Globe and Mail about your unique financial situation by emailing to be part of our Financial Facelift series. You can share your story under a false name and our photographers will obscure your identity in one of our trademark Financial Facelift photos. We’re especially keen to hear from the young, the struggling, the self-employed, artists, painters, poets, freelancers, contract workers and small-business owners. Learn how to make sure your financial future is secure.

More Carrick and money coverage For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group. Send us an e-mail to let us know what you think of my newsletter. Want to subscribe? Click here to sign up.

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