Historically, the real estate market, was, somewhat, cyclical, where, Sellers, Buyers, and Neutral Markets, from time – to – time, seemed to hold, the upper – hand! However, we have witnessed, for approximately, the last year (or so), at, or near, record – levels/ rates of increasing prices! Some wonder, whether this will continue, and, if, so, for how long, while others, seem to believe, this will be the new – normal! Since, there are several factors, involved, this article will briefly, consider, examine, review, and discuss, six of the more relevant ones, and why they matter, and the potential impacts, and ramifications,
1. Mortgage rates: Never before, at least, in recent memory, have we witnessed this prolonged period of record, or, near – record, low mortgage interest rates! Even, a slight amount of rate increase, has, reduced interest, to some degree, so, what might occur, when the Federal Reserve Bank, raises the costs of borrowing, as many believe, will occur, at least, by the end, of next year. Since, every, one – percent, increase, in what one pays, increases monthly costs by over $60 per $100,000 – borrowed, per month, it is easy to see, the impact, and potential ramifications!
2. Supply and Demand: Like, most economic matters/ issues, the Law of Supply and Demand, applies, to housing, and real estate activities, etc! When, supply exceeds demand, prices go down, or stay – steady, and when the opposite occurs, rising home pricing, occurs!
3. Inventory: Homeowners create the second principle, by, whether, they are ready, and willing, to put their property, on the market, or not! This creates the degree of so – called, inventory, which begins the Supply and Demand, cycle!
4. Buyer interest/ motivation: It’s essential to differentiate between those, who, enjoy looking at real estate, and, truly, qualified, potential buyers! How much, and how long, a significant degree of motivated, buyer interest, continues, and, at what level, often, determines perceived values, etc!
5. Strength of economy: We have witnessed periods, which were, inflationary, recessions, depressions, and, stable/ stagnant, and few have been able to accurately, predict, the timing of these! How long, any economy stays strong, and/ or, is believed to, has impacts on buying conditions, and any willingness to purchase houses!
6. Perceptions: Often, perceptions are more significant than reality, in terms of the behavior of real estate buyers and sellers! When some perceive certain future possibilities, it often dictates their actions, and behaviors!
Will this ever – rising rate of real estate pricing, continue, or is it, the new – normal? Is it merely a shorter – term, trend, and will we see changing market conditions?