Interest rates are now pushing 4.5% for an average 30 year mortgage which still remains historically low, but more factors than historically low interest rates affect the direction of the real estate market. The US real estate market seems to be cycling with the US economy, so it’s important to pay attention to trends in the economic market place in order to make informed decisions about when to buy or sell.
Buyers are fickle and what makes them buy homes is a combination of factors including perceptions about the US economy including job security, so let’s take a bigger look at the current trends, economic factors and perceptions that may indicate where the real estate market is headed.
First, the US has been in a deflationary trend for more than twenty years but there are indicators that the cycle may be ending and an inflationary one beginning. That means, among other things, that we’ll be experiencing not only higher wages, but also higher costs of goods. Higher wages may be good for everyone, but higher costs of goods are definitely not good for everyone and especially not for the real estate market.
Unfortunately, whether this is actually the beginning of an inflationary period or not, the markets move on perceptions as well as economic realities. If buyers perceive that prices are too high, they may decide to rent and wait on the next cycle to buy, relying on the old adage that what goes up must come down.
If you’re watching the movement of sales on the MLS, it appears many homes are over-priced right now. Perhaps buyers are taking a deep breath and momentarily chasing value, but it may be that we are looking at a beginning shift in the real estate market.
The rising number of short sales is another trend to watch. Short sales increase when the market is pulling back forcing compelled sellers to take less than what they owe on their mortgage. The rise in these short sales adds further downward pricing pressure on the real estate market as a whole.
As a buyer, seller, or current homeowner, one should always keep a keen outlook for clues about trends in the economic marketplace to make informed decisions that protect your current or potential investments in real estate.
Take a look at the videos on Altru Realty about how to price a home correctly to maximum gain. Now may be the right time to get priced very relevantly and sell into the spring and early summer market strength, or if you’re a buyer, pay attention to the market movements to get the most bang for your buck.