Historically, the real estate market, was, slightly, cyclical, where, Sellers, Buyers, and Neutral Markets, from time – to – time, seemed to keep up, the upper – hand! However, we have witnessed, for approximately, the last year (or so), at, or near, record – levels/ rates of increasing prices! Some surprise, 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 applicable ones, and why they matter, and the possible impacts, and ramifications,
1. Mortgage rates: Never before, at the minimum, in recent memory, have we witnessed this prolonged period of record, or, near – record, low mortgage interest rates! already, a slight amount of rate increase, has, reduced interest, to some degree, so, what might occur, when the Federal save Bank, raises the costs of borrowing, as many believe, will occur, at the minimum, 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 possible ramifications!
2. Supply and need: Like, most economic matters/ issues, the Law of Supply and need, applies, to housing, and real estate activities, etc! When, supply exceeds need, prices go down, or stay – steady, and when the opposite occurs, rising home pricing, occurs!
3. Inventory: Homeowners create the second rule, by, whether, they are ready, and willing, to put their character, on the market, or not! This creates the degree of so – called, inventory, which begins the Supply and need, cycle!
4. Buyer interest/ motivation: It’s basic to differentiate between those, who, enjoy looking at real estate, and, truly, qualified, possible buyers! How much, and how long, a meaningful 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 precisely, 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 buy houses!
6. Perceptions: Often, perceptions are more meaningful 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?