The housing market trend has been flourishing in recent years.
After the housing market crash and global recession of 2008, unemployment has been decreasing, wages have been rising, and consumer spending has increased. Collectively, these factors have resulted in more home purchases, higher home prices, and therefore, a stronger housing market. Though prices have grown at different rates in different areas, the housing market overall has performed strongly.
The question is, will this performance last?
A Good Time to Sell?
The housing market can affect you in many ways, including its influence on the economy overall; after all, the housing market was the first link in the chain that led to the recession of 2008. But its biggest influence is likely on the price of your home.
If you believe the housing market will continue to grow, it’s in your best interest to hold onto your house, realizing further gains on your property investment. If you believe things are slowing down, or worse, if they’re about to crash, it may be wiser to get out now.
It’s very hard to time the real estate market perfectly, even for seasoned investors and real estate agents. However, if you believe a soft or hard landing is on the horizon, now may be a good time to get your house professionally cleaned, make those last-minute repairs, and contact a real estate agent for direction.
Factors to Consider
So what’s the best way to gauge the potential for the housing market in the near future?
These factors can help:
- Economic indicators.
Economic conditions have a powerful effect on the housing market, and vice versa. When people are employed, making good money, and feeling confident about the state of the global economy, they’re much more inclined to purchase a new home. This increases home prices and home sales, and allows the market to thrive. As long as economic conditions remain good, prices should at least be sustained. Market volatility has been rampant in recent months, but other economic indicators remain strong; for example, unemployment continues to hover near record lows, wages are stable, and there are ample prospects for global economic growth. Accordingly, these conditions suggest the housing market may flourish for years to come.
- Home affordability.
A bigger influencing factor in the trajectory of the housing market could be home affordability. Currently, few new homes are being built, which is limiting the stock of available homes. Homes are in demand, so naturally, the fixed inventory and rising number of purchasers are pushing prices higher. At some point, prices will be so high that even the most interested homebuyers won’t be able to afford them. When that happens, there will inevitably be a cooling period, where prices slowly fall back to a more affordable range.
- Neighborhood differences.
It’s also important to acknowledge that the trends that unfold on the housing market on a national scale may not necessarily reflect the trends that occur within individual neighborhoods. For example, San Francisco is notorious for its ridiculously expensive houses, which have exploded in price over the past few years, but a small town in the Midwest might have seen much more modest growth, or even stagnation. If the housing market begins to cool, San Francisco will be hit hard, while that small town in the Midwest will barely be affected.
- Interest rates.
One of the reasons homes remain affordable (and why homes are in such high demand) is the relatively low interest rate available to purchasers. Mortgage rates have hovered around 3.5 percent to 5 percent, which is good for home buyers, but if the Federal Reserve increases interest rates, it could push these common rates much higher. Even a difference of a percentage point or two could add hundreds of dollars to the average homeowner’s monthly payment, which could scare off otherwise interested buyers.
- Crash indicators.
We can also look for indications that a housing market crash is coming, though crashes are hard to predict. The housing market crash of 2008 was the result of a pricing bubble, in combination with shady lending and banking practices. While no crash indicators are present at the moment, sudden economic turns tend to blindside people.
These signs are somewhat ambiguous, so it’s hard to make a definitive assessment of the future of the housing market.
However, as of now, there aren’t any major influencing factors to suggest a housing market crash or sudden decline is on the horizon. It’s also unlikely that housing price growth will continue indefinitely.
If you’re currently considering selling your home, you’ll have to examine the pricing trends in your neighborhood closely and come to your own conclusion about whether now is the right time to sell.
Larry Alton is a professional blogger, writer, and researcher. A graduate of Iowa State University, he's now a full-time freelance writer and business consultant.Currently, Larry writes for Entrepreneur.com, Inc.com, and Forbes.com, among others. In addition to journalism, technical writing and in-depth research, he’s also active in his community and spends weekends volunteering with a local non-profit literacy organization and rock climbing. Follow him on Twitter (@LarryAlton3), at LinkedIn.com/in/larryalton, and on his website, LarryAlton.com. To read more of his reports — Click Here Now.
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