Understanding the housing market is important to sellers, buyers, industry professionals, and policy makers. Almost everyone has an opinion about what will happen in real estate. Here are three trends we are watching that are driving real estate markets.
Prices are rising over the long term.
Home values remain stable in 2024. Most markets are up year over year. If a local market has lots of new construction (increasing supply), prices are most likely flat or down. If a local market has little new construction (low supply), prices are most likely higher than last year.
In real estate, quickly rising prices or quickly falling prices are undesirable. Historically, the real estate market has been defined by prices rising slowly over the long term. In the current market, if home prices were to fall it would most likely be the result of a deflationary economic cycle.
Interest rates may go down.
There is a lot of discussion about the federal reserve reducing short-term interest rates. If the Fed lowers short-term interest rates, it may or may not result in mortgage interest rates going down. Mortgage interest rates follow the 10 Year Treasury Note. The 10 Year Treasury reflects expectations of inflation in the future whereas the interest rate the Fed is changing reflects current inflation levels.
If mortgage interest rates go down, it lowers the cost of buying a home which results in higher demand for homes and typically causes home prices to increase.
Rent or buy?
Many large institutional investors are trying to convince the American public to rent instead of buy a home. These institutions understand that in the long run, it is better to own a home than rent. If owning a home were a poor investment, institutions would not have spent hundreds of billions of dollars purchasing them.
Today, monthly rent may be less than an equivalent mortgage payment. Over time, rents increase and mortgage payments remain the same (or fall with a refinance). Eventually, the mortgage is paid off. Over the long run, it is better to buy than rent.
Whether you are buying, selling, renting, investing, or developing, we look forward to assisting you with all of your real estate needs.
