It seems, almost every day, someone asks me, how much higher, and more expensive, the price of houses, will go, and is it sustainable. Unfortunately (or, perhaps, fortunately), I can’t read tea leaves, or a crystal ball, so I have to hedge my bet, and, merely explain the three possibilities, and some of the related, relevant factors, involved. Housing prices, generally, are dependent upon a few key factors, including supply and demand, the overall economy, buyer (and seller) perceptions and expectations, the local (and national) job markets, interest rates, etc. With that in mind, this article will attempt to briefly, consider, review, and discuss, the three principal scenarios.
1. Continue to rise: The first possibility is, the real estate market, and, prices, will continue to rise, and thus, housing will become more expensive. Traditionally, and historically, every trend is a cycle, and, therefore, there will always be, ebbs – and – tides, in terms of these trends, etc. How long mortgage interest rates remain relatively low, how much consumer confidence, remains in the overall (and especially, local) economy, the supply of houses, on the market, and the number, and quality of qualified buyers, all are key components! However, unless today’s cycle is unlike all of the ones, in the past, although, over time, the price of houses, rise, it has never been, a steady increase, and there are generally, so – called, corrections, and adjustments, along the way. How long this might continue, is difficult to understand, and predict, but smart buyers and sellers, remain aware, and prepared!
2. Prices flatten: The second possibility is for housing prices, to become flat, and/ or steady. We have often witnessed, this, and it may go on, for a short, or prolonged period, generally based on the factors, mentioned earlier in this article. Remember, nothing, remains, the same, forever!
3. Price drops/ decreases/ adjustments: When prices rise, too quickly, at least as far as potential buyers, perceive it, there often becomes buyer – resistance, and, the price, drives away, some, because it becomes unaffordable. In addition, the tax law, passed at the end of 2017, removed some of the benefits of home ownership, especially in states, with high real estate taxes, etc. That law placed a cap, on how much taxpayers, can deduct, and, while, in some parts of the country, $10,000, is not a major deterrent, in higher tax areas (known as SALT, or state and local taxes), such as major metropolitan regions of New York, New Jersey, Connecticut, Massachusetts, California, etc), that amount doesn’t come close to the amount of taxes paid, and thus, the tax benefit, becomes far less. When this happens, the houses in those areas, often undergo a considerable tax adjustment.
The lesson to learn, is to look, at the bigger picture, and the long – term. The smart homeowner, is the one, who considers his overall needs, etc, and proceeds accordingly!