Although, historically, owning real estate, has been, one of the greatest ways, to counter, the effects of inflation, etc, it is important to realize, recognize, and understand, in the shorter – term, there are rarely, any guarantees! There are, up, and down, periods, in these markets, and, while, some years, we witness, significant asset growth, etc, there have, and will, most – likely, be times, when, values decrease, at least, temporarily. Presently, we are experiencing, a real estate market, which is considered, a Sellers Market, with house prices, rising, significantly, and, witnessing, more buyers, than, available houses, available, and the effects, of, Supply and Demand, from an economic standpoint. When, we combine this, with the effects, from this past year’s, horrific pandemic (and, associated, living 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, over – heated market – place! With, that, in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 5 factors, which will, probably, impact, real estate, especially, in the shorter – term.
1. Interest rates: Prior, to the pandemic, the Federal Reserve Bank, seemed to emphasize, attempting to stimulate the economy, by maintaining, very low – interest rates! Once, the public health crisis, hit, they found it necessary, to attempt to do, everything, possible, to ensure, an economy, somewhat – ravaged, by the necessary economic closures, etc, survived, and performed, as well as possible, and thus, used dramatic measures, to assist these efforts! Because of this, today’s mortgage rates, for a long – period, have been, at, or near, historic lows, and, it appears, will continue, being, that way, for a period, going – forward. When mortgage rates are low, it, often, creates, higher home prices, because, potential, qualified buyers, are able, to purchase, more house – for – their – bucks!
2. Inventory/ Supply and Demand: Presently, the supply of houses, available, for sale, on the market, is, especially, low, and, thus, we are witnessing, extremely, limited, inventory! The economic laws, of, Supply and Demand, create, therefore, rising prices, because, there are more potential buyers, than available houses, for – sale! How long, will that continue?
3. What buyers seek/ personal taste: Buyers tastes, and preferences, and, what they are looking – for, in a potential home, consistently, changes, over – time! Therefore, what, is presently, sought, will, most likely, change, into the future!
4. How long will prices, keep rising?: How long, and how high, will prices, keep going – up? Will it, become, increasingly, difficult, to obtain mortgages, because, lending institutions, will be concerned about real estate values, in terms of assessments, etc? When will buyers, begin to resist these increases, because, potential purchases, are perceived, as too expensive, etc? If, and, when, interest rates, go up, somewhat, as they, most – likely, will, how might that impact demand, and thus, pricing?
5. Escalating building supplies: It is estimated, the cost of building supplies, for average, new houses, has increased, over $35,000, in the past, few months! Obviously, this means, new homes, will cost more! Will that, eventually, create, a slow – down, and, when, might these run – away, growing costs, become more controllable, again?
Since, no one has a crystal – ball, doesn’t it make sense, to consider, what potential challenges/ possibilities, may be, and, be, as prepared, as possible. Housing should be considered, at most times, as a long – term, financial asset, and avoid, trying to market – time, and/ or, speculate!