Recently, a group of realtors pinpointed the biggest issues that are currently impacting the housing market. These are issues that could have consequences for homeowners, realtors and mortgage professionals alike!
Right now, the biggest issue concerns interest rates. Historically, low interest rates have always driven the economy and in turn the real estate markets. Since the rates have increased recently, capitalization rates could also rise. That refers to the ratio between the income produced by an asset and the cost of it. This could lead to investors and homeowners becoming more and more wary of their purchases.
Another concern revolves around healthcare. As the population continues to age, there will eventually be a demand for more senior housing. This will have an affect on available housing inventories and the building industry for both medical facilities and senior housing.
Economists have even started accounting for a future housing boom! Between 1982 and 1995, there were 80 million Americans born. They are calling this an "echo boom". Those that fall into this age range tend to prefer urban lifestyles that are flexible and active. However, there are also plenty who prefer the suburbs. This could lead to a future need for even more mass transit for those commuting between the suburbs and the city. There will be money pouring into bike paths and public transportation, as well as homes with great locations!
Right now, commercial real estate is doing well. There have been increases in transactions for these properties and plenty of credit is available. Also, the underwriting for commercial real estate is less restricted than in the past and plenty of debt options are in place. However, the residential market is still seeing tough underwriting rules. But the rates are still relatively low and affordability in general is high!
Extreme weather and the changing climate are another issue. Areas that are continuously affected by storms and hurricanes, like those in the path of hurricanes Katrina and Sandy, are facing changes in code and zoning standards. They are also having to pay much higher insurance premiums. All of this has a strong impact on coastal homes.
An issue that is harder to calculate includes global events like terrorism, war and debt crisis. It is hard to anticipate what could happen but economists agree that the impact of major events can lead to drastic changes. But that goes without saying.
An issue that is a bit easier to analyze concerns the increased natural gas and oil production in the US. This is having an impact on the economy and the environment. On one hand, the increase of these productions have lead to more employment opportunities and reduced America's dependence on foreign oil supply, but climate changes and potential contamination have a big affect. If there are communities in nearby areas, it could really change the value of the homes.
Lastly, technology is changing the world as we know it. Many offices and corporations are choosing to employ people to work from home. This can cause some companies to downsize their office space which has an affect on commercial real estate. With less retail space needed, there will be fewer and smaller stores. Retail demand is down across the country due to an increase in internet sales.
All of these issues have a play at this game of tug-o-war that is balancing the housing market. While the market is recovering overall, trained economists are required to keep an eye on this delicate balance.
There will be many changes in the future. Right now, some of the best advice we can give is to lock in low mortgage rates while they are still low.
If you have any questions or would like more information about how all of these issues can impact your local housing market, give us a call at 877-828-8851.
Tuesday, November 12, 2013
Issues the Housing Market is Currently Facing
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