March 24, 2023
There has been an increasing trend in real estate purchases in the past few years. Houses have been selling like hotcakes, so to speak, and many have claimed that this real estate boom is far from being over. There are a few reasons that have been cited which give some insight into the current real estate market and why real estate sales are not likely to decrease for some time to come.
Building Business Not Booming As Much As Real Estate Sales
There are many reasons why the real estate market slows down. One such reason is due to an overexpansion of homes for sale. Although, the home building business has been quite profitable, it still has a ways to go in order to catch up with real estate sales. This is a good thing because there are not quite enough houses to meet the current demand and that will keep the market booming for some time. So long as the supply doesn’t swallow the demand, the real estate market will continue to prosper.
Interest Rates Remain Reasonable
While interest rates have increased somewhat when compared with the past couple of years they are still relatively low and make many people want to buy a home. These attractive rates help keep the real estate market going because most individuals need loans to purchase homes and low interest rates make the overall purchase less expensive. So long as the interest rates remain somewhat stable, prospective homebuyers will still be expressing great interest in the purchase of a home simply because low interest rates make the investment more affordable.
Length of the ARM Fixed Rate Portion Is Increasing
For those who have adjustable rate mortgages (ARMs), they may have worried about the adjustable rate portion when their fixed rate portion was depleted. Recently the fixed rate portion of the ARM has been increasing with regard to length of years in which it is active. This has led to stabilizing the real estate market and has also attracted individuals to purchase a home via an ARM that has this new lengthier fixed rate period.
Flipping of Real Estate Not As Prevalent As It May Seem
Some individuals have been concerned that flipping of real estate, which is the purchase and quick sale of the real estate thereafter, is something that might cause the real estate bubble to burst. However, those who have expressed concern can rest easy knowing that the percentage increase with regard to flipping from 1998 to 2003 is only 1%. When viewing the overall scheme of things, a 1% increase within 5 years is not something that should cause too much concern.
The real estate market has been doing quite well in the past few years and the above factors combine to make what some believe is a real estate bubble that is sure to burst. Whether this real estate boom continues for a long time to come is something which remains to be seen. However the real estate market seems to be remaining steady and while home prices might continue going up supply is not outweighing demand and people keep buying. So, only the future will show when the real estate market starts slowing down.