What They Don’t Tell You – Real Estate Market Trends
Everyone has an opinion about residential real estate market trends. Most predictions have merit, while some of them are just a shot in the dark. The focus tends to be on the volatility of housing prices, predictions on how long the mortgage lending rates will remain at record lows, and the influx of Millennial home buyers. All the while you are bombarded with across the board forecasts by economists and analysts predicting how the market will be affected in the coming years.
Many real estate forecasts don’t always reflect both short term and long term market conditions. The focus is often current trends of whether the real estate market is up or down, the difficulty of home owners trying to sell, and home buyers trying to qualify for and afford loans. Through it all, you will always have families that are struggling “to make ends meet”, investors who are eating up supply, and real estate agents who are trying to cater to everyone’s needs.
Those buyers who were suckered into those misleading mortgages thought they would be okay making minimum payments since that worked before, but weren’t actually told that they weren’t paying off the interest. Unfortunately this happened to a lot of people, causing them to go into extreme debt. Those low mortgage rates that the banks rolled out had people buying all over the place. When many home owners weren’t able to make their monthly mortgage payments, bankruptcy and the housing crisis happened. Of course there were a lot of other factors contributing to the housing crash, but one thing we need to be careful of is not making the same mistakes again.
A number of analyses of the housing crash in 2008 show that a main cause for this economic downturn is attributed to the irresponsible lending practices to homeowners who weren’t in any position to pay back their loans. This “subprime” lending was risky and ended up backfiring on the lenders and banks causing the US government to bail financial institutions out.
Home owners who were not well informed when taking out those adjustable rate mortgages (ARMs) went into extreme debt. Many had to file for bankruptcy while banks forced millions out of their homes through foreclosure. Just another reason why many are renting and not buying.
Good news is the families that had to file for bankruptcy are finally emerging while those who were forced out of their homes are beginning to recover financially. They are placed in a difficult position though since the economy is giving mixed signals. Inflation is increasing, a weak GDP growth was reported for the first quarter of 2015, and earlier this week the Dow Jones took a 350 point hit causing many consumers to try and protect their assets.
However, we are still seeing positive recovery in the midst of market fluctuations. Improved job growth is giving rise to a higher consumer confidence level, which hopefully, is a good indicator for long term improvement of consumer finances. The fact remains though that there are still a great deal of people who don’t necessarily know the impact their decisions have on the housing market should they choose poorly when buying their first home.
Low interest loans are enticing, especially to first time home buyers who dream of home ownership. There is a need for home buyers to save more money and be more responsible in their spending. With a possible second housing bubble forming, the time is now to make smart decisions in real estate.
We can’t control what the feds do with interest rates, what we can control is the amount of education we provide our buyers that are entering the home market so they can make informed decisions. This means as real estate professionals we need to be knowledgeable ourselves and have the goal of educating versus just making a quick buck.
In our post interviewing first time home buyers, you can see how first time buyers rely on the advice and direction of their real estate agent. First time home buyers will hopefully research about home buying so they aren’t going into it blind, but ultimately, they take what their agent says to heart.
You my friend have a big impact on your clients and ultimately the market. It’s not your job to make buyers experts, but it is your job to help them make the best decisions possible. If enough real estate professionals give their clients guidance on what it actually means to be a home owner – taxes, mortgages, unexpected expenses, home owners’ associations – they can help stabilize the market AND help first time home buyers realize their dream of home ownership.
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