When Could Home Prices Hit Their Threshold: 5 ConsiderationsReal Estate
Most people have witnessed both the ups and downs of the property markets and conditions, such as the buyers and sellers markets, and many situations in between. Over the past few years, in many areas of the country, house prices have risen, steadily, year after year. This is likely due to a variety of reasons and circumstances, including, but not limited to: historical: low mortgage rates; improvement of the labor market; increased consumer confidence; the desire to own your part of the so-called American Dream; the quality performance of the US economy, including the Stock Market; etc. Many have wondered when and if we will reach a threshold in terms of house prices and why. With that in mind, this article will briefly attempt to consider, examine, review and discuss 5 considerations / factors that could have an impact.
one. Interest / Mortgage Rates: When interest rates are generally low, mortgage rates generally act in a similar way. In recent memory, I remember interest rates, as high as high teens, at today’s low levels, between 3.5 and 4.5%. When rates are low, it means that potential homeowners can buy more home for their money, because they qualify for higher mortgage amounts. The opposite occurs, when / if, these, rise, in the opposite direction. So if we witness an increase, especially a significant one, in rates, the result will most likely be to limit or lower house prices!
two. General economy: The bigger the overall economy, or at least the perception of it, the better the housing market will be. When these positive conditions occur, we often see a seller’s market, because there are more buyers than corresponding homes for sale at the time. This creates, according to the Laws of Supply and Demand, that buyers have to and are willing to pay more for their homes.
3. Work confidence: The greater the public’s confidence in the labor / employment market and job security, the stronger the real estate conditions. This results in the costs to buy going up! When confidence falls, buyers are often more hesitant to make such a significant move, and it can result in a buyer’s market driving down home prices.
Four. Consumer confidence: When the overall perception is strong, from consumers, housing and real estate are generally stronger! When this falls, we witness the opposite!
5. Affordability: Pay attention to rental prices, because when more people buy, there are generally more rentals available and therefore rents are stable and / or going down! The question is, at what point do potential buyers perceive this as unacceptable?
Although, traditionally, over time, real estate has outpaced the appreciation of other assets, no one can read the future! Smart buyers and sellers, pay close attention to all the factors discussed, as well as other relevant ones!