The housing market is going through some changes. To put it simply, the market is nuts right now. There’s a lot going on that is making housing purchases deviate from the norm..
These market conditions are impacting prices, practices, and everything tied to real estate. On top of that, no one can predict what will happen next. How are you supposed to get ahead?
In times of uncertainty, your best bet is to stick to the fundamentals. So let’s go over the current housing market and give you some insight as to the hows, whys, and whats of it all.
If we’re focused on an up-to-date analysis, then inflation has to be a leading topic. There’s a lot of inflation around the world right now, and it’s especially prevalent in the United States. We can skip all of the political talk people might be inclined to discuss. It doesn’t matter why there is inflation. When you’re analyzing the housing market, it’s important to understand that inflation does impact housing too.
For right now, inflation is projected to continue, and it will push housing prices up on average. Some markets will be affected more than others, but for the short term, you can expect that housing prices have not peaked yet.
That said, if and when inflation cools down, there’s a good chance that housing prices will rebound at least a little. No one can predict the future, but any investor needs to be prepared for short-term equity losses if you buy right now. This doesn’t make housing a bad or dangerous investment. It’s just part of the equation.
Supply and Demand
This is a classic phrase, but it’s important to understand it and apply it to the current housing market. Right now in the United States (and much of the world), there aren’t enough houses for everyone trying to buy. That means there is a strong seller’s market right now.
These conditions push housing prices up, and they make purchases a lot more competitive than they might traditionally be. If the supply crunch can be alleviated, you can expect housing to switch to a buyer’s market very quickly, but for now, it’s very much a seller’s market.
Because of these conditions, it’s tough to close on a house. Offers are intensely competitive, and a lot of houses are sold above market value, for cash, without ever being listed. That’s basically unheard of before a few years ago.
So if you want to buy right now, you’ll have to put up a fight. There is a huge advantage to buying upfront with cash. Also, you need commercial reach to help you find houses before they are sold.
The money supply is tied to inflation. If you want to be an economist about it, then the money supply is directly correlated to inflation, but we’re really focused on the housing market right now.
The Federal Reserve is trying to tighten the money supply in order to combat inflation. That means you can expect interest rates to go up for the foreseeable future. When interest rates go up, it means most people can’t afford the same house with a loan. This puts real estate investors at an advantage if they can offer cash outright.
The Fed has made it clear that they will aggressively raise interest rates until inflation slows down, and no one knows exactly how long that will take. It’s important to keep up with Fed discussions around interest rates.
The housing market is tied to the greater economy, and there’s still a lot of volatility in the world. That’s not going to change very quickly either.
There are two takeaways from this truth. First, you’re not going to be able to time the market perfectly. That’s a lost cause. Focus on sound investments and buying a house that makes sense as an investment.
The other takeaway is that you need to stay flexible. You have to be ready for the entire nature of the market to shift on a dime. This doesn’t mean you need to predict the future. As long as you’re ready for change, you can stay fluid. As long as you adapt ahead of the curve, you can make real estate work for you regardless of the type of market.
Based on the current market conditions, real estate investments might feel more dangerous or intimidating than usual, but it doesn’t have to be that way. As long as you have access to good information and resources, you can make smart choices. That’s a good reason to talk to Investor Nitro. We can help you find properties, manage your methodologies, and improve your opportunities for financial success in real estate.