House Price Rise: New – Normal or Trend?: 6 Factors to Consider!
Historically, the real estate market was somewhat cyclical, where sellers, buyers, and neutral markets, from time to time, seemed to have the upper hand. However, we have witnessed, over the last year or so (or so), at or near record levels/rates of price increases. Some wonder if 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 most relevant ones, why they are important, and the potential impacts and ramifications.
1. Mortgage Rates: Never before, at least in recent memory, have we witnessed this extended period of record or near record low mortgage interest rates! Even a small amount of rate increase has lowered interest, up to a point, so what might happen when the Federal Reserve Bank raises borrowing costs, as many believe, will, at least , in the end. next year Since every one percent increase, in which country, increases monthly costs by more than $60 per $100,000 borrowed, per month, it’s easy to see the impact and potential ramifications!
2. Offer and demand: As in most economic issues/problems, the Law of Supply and Demand is applied to housing and real estate activities, etc. When supply exceeds demand, prices go down or stay flat, and when the opposite happens, house prices go up!
3. Inventory: Homeowners create the second principle whether they are ready and willing to put their property on the market or not! This creates the degree of so-called inventory, which starts the supply and demand cycle!
4. Buyer interest/motivation: It is essential to differentiate between those who enjoy looking at real estate and truly qualified potential buyers! How much and for how long does a significant degree of motivated buyer interest continue and at what level often determines perceived values etc.!
5. Economy strength: We have witnessed periods that were inflationary, recessions, depressions, and stable/stagnant, and few have been able to accurately predict the timing of these! How long does an economy stay strong and/or is it believed to have an impact on buying conditions and any willingness to buy houses!
6. Perceptions: Perceptions are often more significant than reality, in terms of the behavior of real estate buyers and sellers! When some perceive certain future possibilities, they often dictate their actions and behavior!
Will this ever increasing rate of home prices continue, or is it the new normal? Is it just a shorter-term trend and will we see changes in market conditions?