5 Factors Which Will Impact Real Estate In The Shorter Term

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In spite of the fact that, historically speaking, owning real estate has been one of the best ways to protect oneself against the effects of inflation and other economic factors, it is essential to acknowledge, recognise, and comprehend that, in the shorter term, there are almost never any guarantees! In these markets, there are up periods and down periods, and even if some years we see large asset growth, etc., there have been and most likely will be times when values decrease, at least temporarily. This is because these markets go through cycles of growth and decline.

At the moment, we are in the midst of a real estate market that is known as a Seller’s Market. This is due to the fact that house prices have been significantly increasing, and we are seeing a greater number of buyers than there are houses on the market. This is an example of the effects of supply and demand from an economic point of view.

Many people believe that there is a possibility of an overheated market place as a result of the combination of the effects of last year’s terrible pandemic (and, associated, living challenges and uncertainties, etc.), along with a near-record, prolonged period of very low (historically), interest rates. This combination has created what many people believe to be a potentially overheated market place! Keeping this in mind, the purpose of this article is to make an attempt to quickly assess, examine, review, and explain five elements that are likely to have an effect on real estate, particularly in the short term.

  1. Interest rates: Before the pandemic, the Federal Reserve Bank appeared to place an emphasis on attempting to stimulate the economy by keeping interest rates at exceptionally low levels. Once the public health crisis began, they realised it was necessary to make every effort to ensure that an economy that had been somewhat harmed by the need for economic closures, etc., survived and performed as well as it possibly could. As a result, they resorted to drastic measures to assist in these efforts! As a result of this, mortgage rates in today’s market have remained at or around all-time lows for an extended period of time, and it appears that this trend will continue for a period of time moving forward as well. When interest rates on mortgages are relatively low, home prices tend to rise because purchasers who are financially capable of making the purchase are able to acquire a greater quantity of dwelling for the same amount of money.
  2. Inventory/Supply and Demand: At the moment, the supply of properties that are currently available for sale on the market is particularly low; as a result, we are witnessing a situation in which there is an incredibly restricted inventory! The economic rules of Supply and Demand lead prices to rise since there are more people who are interested in purchasing a home than there are homes that are currently available for purchase. How much longer is that going to last?
  3. What buyers are seeking for and their personal preferences Buyers’ tastes and preferences, as well as what they are looking for in a possible house, regularly vary over the course of the buying process! As a result, what is being looked for right now will almost certainly shift in the years to come!
  4. For how much longer will prices continue to go up? How much further will prices go up, and how long will this trend continue? Will it become increasingly difficult to secure mortgages as a result of the concerns that lending institutions will have over real estate valuations, in terms of assessments, and so on? When will consumers start to object to these price hikes on the grounds that their potential purchases will be deemed unaffordable and other factors? What kind of an effect do you think it will have on demand, and consequently on prices, if and when interest rates go up a little bit, as it is highly likely that they will?
  5. The rising cost of building supplies It is estimated that the cost of building supplies for typical new houses has climbed by more than $35,000 in the recent months. Clearly, this indicates that the cost of newly built homes will go up. Will it, eventually, create a slowdown, and when might these runaway, increasing costs become more controllable again? Eventually, yes. Eventually, no.

Considering that no one possesses a crystal ball, doesn’t it make sense to think about what potential difficulties or opportunities there may be and to be as prepared as you possibly can? Housing should almost always be regarded as an investment with a long-term horizon; one should steer clear of trying to market-time or speculate with real estate.

For the past four decades, Richard has owned businesses, served as COO, CEO, Director of Development, and consultant; professionally managed events; advised hundreds of clients; and led personal development seminars. In addition, he has been a licenced real estate salesperson for the past 15 years.