While historically owning real estate has been one of the best ways to counter the effects of inflation etc., it is important to realize, acknowledge and understand that in the short term there are rarely any guarantees. ! There are bullish and bearish periods in these markets and while in some years we do see significant growth in assets etc., there have been, and most likely will be, times when values decline, at least temporarily. We are currently experiencing a real estate market, which is considered a Seller’s Market, with home prices rising significantly and witnessing more buyers than available homes, available and Supply and Demand effects. , Under the economical point of view. When we combine this, with the effects of last year’s terrible pandemic (and associated challenges and uncertainties, etc.), as well as a near-record prolonged period of very low (historically) interest rates, it has created , what many believe, is a potentially overheated market. With that in mind, this article will attempt to briefly consider, examine, review and discuss 5 factors that are likely to affect real estate, especially in the short term.
one. Interest rates: Before the pandemic, the Federal Reserve Bank seemed to emphasize trying to stimulate the economy by keeping interest rates very low. Once the public health crisis hit, they found it necessary to try and do everything they could to ensure an economy, somewhat devastated, by necessary economic shutdowns etc., survived and performed as well as possible. , and therefore used dramatic measures to aid in these efforts. Because of this, today’s mortgage rates have been at or near record lows for a long period of time, and it looks like they will continue to be that way for a period of time into the future. When mortgage rates are low, it often creates higher home prices because potential and qualified buyers can buy more homes for themselves. Dollars!
2. Inventory/Supply and Demand: Currently, the supply of homes available for sale on the market is especially low and therefore we are seeing extremely limited inventory. The economic laws of Supply and Demand therefore create rising prices, because there are more potential buyers than available houses, for sale! How long will that continue?
3. What buyers are looking for / personal taste: Buyers’ tastes and preferences, and what they are looking for, in a potential home, are constantly changing – over time! Therefore, what is currently sought will most likely change in the future!
Four. How long will prices continue to rise?: For how long and to what extent will prices continue to rise? Will it be increasingly difficult to obtain mortgages, because credit institutions will worry about real estate values, in terms of appraisals, etc.? When will buyers start to resist these increases, because potential purchases are perceived as too expensive, etc.? If and when interest rates rise a bit, as they most likely will, how might that affect demand and therefore prices?
5. Climbing building materials: The cost of building materials, for the average new home, is estimated to have increased by more than $35,000 in recent months. Obviously, this means that new houses will cost more! Will that eventually create a slowdown, and when might these spiraling, runaway costs become more controllable again?
Since no one has a crystal ball, doesn’t it make sense to consider what potential challenges/possibilities may arise and be as prepared as possible? Housing should be considered, in most cases, as a long-term financial asset, and should be avoided, trying to trade, time and/or speculate!
