Real estate is constantly changing
The Real Estate market has been gaining strength in the last few years, in particular during the COVID-19 pandemic. Property values soared, buyer demand jumped, and mortgage rates hit historic lows. And ultimately, it’s made housing one of the few bright spots during an otherwise difficult time.
Throw in that this industry is highly localized, with different conditions in every city, state, and metro area, and you can’t bet on things staying stagnant for long. But the property market is always in flux, and real estate trends come and go.
Fortunately, understanding the fundamentals of the market can help you stay on top of all these changes. Check out some of those fundamentals below, and scroll down for the most up-to-date real estate trends of the month.
Real Estate Prices
Properties prices are influenced by many factors these days, including local buyer demand and the amount of housing supply that’s available for purchase. Generally speaking, high demand and low supply cause housing prices to rise.
Also mortgage rates can play a role since they impact demand. When rates are lower, there tends to be more interest in buying homes. When rates rise, demand might wane a bit.
Incomes, inflation, and interest rates also play a role. So rising prices? They don’t always mean homes are getting less affordable. If rates are particularly low or incomes are increasing, homebuyers might actually be able to afford more house than they could have previously.
Fortunately, that’s exactly the scenario we’re seeing today. When factoring in rates, income trends, and inflation, consumer house-buying power was actually up 21% by the end of 2020.
In early 2021, mortgage rates hovered around all-time lows, according to Freddie Mac. The average rate on a 30-year, fixed-rate mortgage was just 2.74% in January, up from 3.62% the year before and 4.76% a decade prior.
Real Estate market cycles and crashes
Real estate, along with the overall economy, tends to be cyclical. There are booms and busts, and as we saw with the housing crash back in 2007-2008, some of these extremes can get pretty bad.
Fortunately, most experts don’t think we’re nearing another crisis just yet. Though the economy is in a recession, there are a few key differences in today’s housing market versus those of downturns past.
For one, property owners have record levels of equity. Between Q3 2019 and Q3 2020, homeowner equity jumped by $1 trillion, and according to recent data, a mere 3% of properties have negative equity. This equity protects borrowers in the event their homes lose value, giving them a sort of buffer if the market turns.
Lending standards are also stricter than they once were, so homeowners likely have fewer debts and better credit profiles; overall, they’re more financially equipped to handle the mortgages they’ve taken out. On top of all this, there are low interest rates to consider. The Federal Reserve has committed to keeping the federal funds rate around zero until at least 2023. This should keep mortgage rates low and housing demand high for the foreseeable future.
Here’s what’s happening in the real estate market in June 2021:
- Rates are still super low
- Federal protections are expiring
- Inventory is inching up
- Demand is decreasing and competition is slowing down
- Investors are busy
- Home price drops are becoming more common
- Rents are rising
As you probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.
But those barriers have come crashing down – and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.