For, a variety of reasons, we are currently, experiencing, a real estate market, especially, related to, price increases, which, we haven’t, previously, witnessed, in recent memory! Even, after, over 15 years, as a Real Estate Licensed Salesperson, in the State of New York, the pricing, of certain homes, recently, are, amazingly, high! In certain areas, price increases, for houses, recently, sold, have amounted, to, as much, as 33%, or more, and, some wonder, why, and, what, are the most important factors/ reasons, and how long, might this trend, continue. With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 5 relevant factors, and what they mean, and represent.
1. Supply and Demand: Real estate, especially, pricing trends, often, relate, to the economic concept, of Supply and Demand! When, demand exceeds supply, meaning, more, qualified, potential buyers, than houses, for – sale, and available, prices will rise! How much, and for, how, long, depends, on whether, this trend continues, or changes! Economic theory, states, the relationship between, these two factors, varies, over – time, and, when it changes, the underlying, impacts, on real estate pricing, also, changes!
2. Low interest rates: Few, remember, any time, in recent memory, when we experienced, either, mortgage interest rates, as low, as they are today, or, for such a prolonged/ extended, period of time! When, rates are low, potential buyers, become capable of paying more, because, they get, more, bang – for – the – buck, which means, their monthly, carrying – costs, for any mortgage, are lower. Since, most people, require funding (mortgage, etc), to be able to afford a home, of their own, this creates, generally, rising home pricing!
3. Post – pandemic desires, for change: After, this extended period, of the horrific pandemic, may people, have developed, desires, to make changes, in their lives, including, the location, and types, of their homes. The extended – period, of staying – home, has created, a focus, on the perceived, weaknesses/ flaws, of their present housing!
4. Bidding wars: For the past few months, many houses, have sold, for more, than, they were listed, for! In fact, we witnessed, several, bidding wars, especially, in certain areas, perceived, by many, as most desirable! That created overall, price increases!
5. Better, than average, confidence, in our economy: After, over a year, of a dwindling, economy, and job market, because of the pandemic, which, created, low consumer confidence, the opposite, has occurred, recently, and, both, job/ employment confidence, as well as a feeling of economic stability, etc, have, been factors, in this price increase!
The rising prices, we are witnessing, in home prices, will, certainly, at some point, diminish, so a smart consumer, proceeds, with a better understanding, etc! Be a wise home buyer, and pay attention to your needs, perceptions, and economic, comfort zone!