For, a wide – variety of reasons, many parts of this country, have witnessed, significant price increases, in recent, real estate transactions! We have witnessed, near – record, low mortgage interest rates, the pandemic, and a great demand, for houses, in certain areas (with far more potential buyers, than those, seeking to sell), etc! How long, will this trend, continue, and, when, might, the overall market, calm down, and normalize/ correct, etc? When, might, this, slow – down, etc, because of a variety of factors, etc? With, that in mind, this article will attend to, briefly, consider, examine, review, and discuss, 5 possible influences, to consider.
1. Interest rates: Interest rates are, at, or, near, historic lows, for an expanded period of time. This has resulted in mortgage rates, at, or, even, slightly – below, 3%, which, historically, has not been witnessed, in recent times! How long, might these low rates, continue, and, how might that impact, the overall, real estate market? For every 1%, rates rise, the monthly carrying costs, on a 30 – year mortgage, goes up, about sixty dollars! How might, raising the monthly cost, by several hundred dollars, impact home sales, etc?
2. Job security: When, people, feel secure, in their jobs, etc, they are more willing, to consider, buying a house, and/ or, upgrading. These feelings make most people, proceed, with more confidence, in their longer – term, abilities, to make such a significant commitment, etc!
3. Inflation Concerns: Some consider, home ownership, a fabulous, tool, in addressing, the concerns, related to inflation. On the other hand, if/ when, the Federal Reserve Bank, determines, believes, and perceives, inflation, as a serious issue, which needs to be handled, their process, generally, includes, raising interest rates. When this happens, mortgages become more expensive, as a result, etc!
4. Supply and Demand/ Pricing/ Houses: The economic principle of Supply and Demand, should be considered, in terms of, its impact on the price of homes! What types of buyers, want to move, to a specific area? When, there is lower inventory, and buyers, outnumber sellers, it creates, a Sellers Market, which, generally, causes price rises! When, the opposite occurs, it often, brings – about, a Buyers Market! There are times, when something, in – between, happens!
5. Local considerations: Just, as we’ve witnessed, some regions/ area, have been hotter, during this current real estate market, the rate, and how long, a specific place, and house, will, see its value, escalate, will, most – likely, differ, also. In real estate, often, everything, is local!
No asset, or market, remains the same, for many reasons. Trends, conditions, perceptions, affordability, consumer confidence, inflation, etc, contribute, to markets, and the inevitable, adjustments.