If we learn from the past, in a meaningful way, we would better understand the history of real estate, it should teach us, housing markets are often cyclical! There are bull markets and bear markets, as well as periods, with a greater degree of balance, between these two. Most have heard references to buyer markets, plus vendors marketsHowever, it seems that people continue to overreact to changing conditions, etc. Therefore, it would be beneficial to better understand some of the reasons and driving forces involved in what causes these cycles to occur. With that in mind, this article will briefly attempt to consider, examine, review, and discuss 5 important factors and some of the potential impacts and ramifications involved.
1. Interest rates: One of the driving forces, in the housing markets, is interest rates. These can be market-driven, based on economic conditions, manipulated (for political purposes, etc.), or specifically with mortgage rates. After all, when a country lowers rates for a mortgage, we generally witness higher demand from buyers, because it is possible to get more bang for the buck. Lower rates mean that you gain the ability to buy more home, for your dollars, because the costs of your monthly living expenses are reduced. However, throughout history, these have decreased, increased, and often had a dramatic impact on the industry as a whole.
2. General economy: A good economy generates a higher degree of confidence, because people seem to believe that it is a good time to buy. On the other hand, when there is economic concern, it affects the real estate industry, in a negative way!
3. Consumer / Job Confidence: The better overall job security and consumer confidence, the better the housing market will respond. On the other hand, many people are cautious and worry, whether during actual or perceived changes, or even potential ones, and take a break from searching for a home. The laws of supply and demand will raise or lower prices, when sellers or buyers have a greater supply.
Four. Price / affordability: There is often a point of diminishing returns, when it comes to rising prices! When these rise too quickly (or are perceived as houses that cost too much), many people perceive them as unaffected and stay away from the real estate market. Obviously that will cause a price correction!
5. Real estate taxes: Areas with the highest property taxes often have the biggest swings in the market, because especially since tax law, enacted in 2017, which limited deductions to $ 10,000, these homes become more difficult to market and sell! !
The more you understand and learn from the past, the better prepared you are for future fluctuations. Will you become a smart home buyer?