The speed at which sentiment in the property market can change can be stunning.
Just a few weeks of good economic news and renewed stability in mortgage costs will change how the future values of real estate across America are viewed.
After 18 months in which the Federal Reserve increased interest rates to beat down break-out inflation, sending mortgage costs over 7%, the prospects for a stronger, more open property market are growing by the day.
Buyers are returning and there are a number of signs the market will remain resilient.
Low inventories
While sellers are re-emerging, the current continued shortage of properties is bolstering prices. The National Association of Realtors has highlighted this issue, saying buyers still need to be competitive on price.
March of millennials
A new cashed-up demographic has entered the market in the past few years. Millennials now make up more than 20% of all buyers seeking their first or second home, or an investment property. This additional buyer activity places upward pressure on prices.
Few foreclosures
The trend for foreclosures remains stable even after the Federal Reserve increased interest rates to a peak of 5.5% last July. That sent many mortgages through the 7% barrier. The Fed has foreshadowed the possibility of rate cuts starting in the summer, and this is an excellent indication that the property market is stable and ready to grow in value.
No liar loans
When the financial markets went wild and led to the Great Financial Crisis (GFC) back in 2007, banks were handing out what became known as “liar loans”. Today, a more conservative set of rules applies to lending. The result is a more stable market where only those who can afford a mortgage get one. So, don’t expect chaos in the real estate market.
New home shortage
Builders cannot keep up with the demand for new homes and that supply-demand dynamic needs to stabilize. But that won’t happen quickly, so this will continue to bolster property prices.