While historically owning real estate has been one of the best ways to offset the effects of inflation, etc., it is important to realise, acknowledge and understand that in the short term there are rarely any guarantees. ! There are bullish and bearish periods in these markets and although in some years we witness significant growth in assets etc. at least temporarily. Currently, we are 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 the effects of supply and demand. , 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 prolonged, near-record, period of very – low (historically) interest rates, it has created , which many believe, is a potentially overheated market. With that in mind, this article will briefly attempt to 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 to do everything they could to ensure an economy, somewhat devastated, by the necessary economic shutdowns, etc., survived and performed as well as possible. , and thus used dramatic measures to aid in these efforts. Because of this, mortgage rates today have been at or near record lows for a long time, and it looks like they will remain so for some time to come. When mortgage rates are low, it often creates higher home prices, because qualified potential buyers can buy more homes for themselves. Dollars!
two. Inventory/Supply and Demand: Currently, the supply of homes available for sale on the market is especially low and therefore we are seeing an 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 sought today 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 resisting these increases, because the potential purchases are perceived as too expensive, etc.? If and when interest rates go up a bit, as they most likely will, how might that affect demand and thus prices?
5. Climbing Building Materials: The cost of building materials, for the average new home, is estimated to have risen 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 runaway, rising 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!