Speculation has been brewing for months, ever since real estate prices have hit an all time high, experts everywhere are crying the next Real Estate market collapse is upon us. This idea that the market crash that unfolded in 2008 is bound to repeat itself is a result of the feeding frenzy of real estate that has come as prices have conintued to climb. Demand in the real estate market is indirectly due to the pandemic as the goverment dropped the interest rates so much so that obtaining mortgages were easy for anyone. Those predicting the next crash are not wrong, but they certainly aren’t right; prices will come down to more attainable levels, but it will not be the 2008 reset that many are predicting.
Homes are only worth what buyers are willing to pay for them, fortunately for sellers, this price has risen drastically over the past two years. When a mortgage carries a higher interest rate, prices of homes are limited as buyers have less spending power due to the cost of money. Once mortgage rates take a dive, the buying power of a prospective homeowner is magnified as they can afford a more expensive home for approximately the same rate. The problem with cheap money is anyone can buy anything. Once the pandemic took hold and the United States Federal Reserve slashed rates to zero percent, the real estate market was a cakewalk; buyers could afford more expensive homes for the payments they were used to, but the market began to catch up and just as buyers realized their spending power had been maximized, so did sellers.
Inflation is an economic term that carries a negative connotation. Americans familiar with the term associate it to the economic era of the 1970s when the cost of all commodities in the United States economy rose to unprecedented levels. Inflation causes the prices of everyday goods to increase as demand dangerously outweighs supply, surprisingly, small amounts of inflation are considered healthy for an economy and is the reason the stock market is continuously rising, despite numerous market crashes. Today the inflation evident in America is most comparable to the inflation of the 1970s and housing prices are at the center of the upward trend.
Pandemic era supply chain shortages combined with the extra spending power of Americans have caused the everyday cost of living to reach alarming rates. Government officials now realize their plan to slash rates to inflate the economy at the inception of the pandemic has now backfired. Hoping to save Americans from rising prices, the Federal Reserve has announced that in 2022, rates will begin to rise to pre pandemic levels. This means Americans who were able to buy a home and pay much more for it after the pandemic than before with a comparable monthly payment will no longer have such luck. Just as homes were rapidly appreciating due to low rates, the opposite affect is likely once rates return to normal levels.
Life after the pandemic will be different and so will real estate. The American government’s response to the pandemic may come to be known as an extreme measure that ushered in the age of inflation, but as this trend begins to end it is important to make the most of it. Fortunately, real estate prices are based on demand and what someone will pay. Even as the writing is on the wall for home prices, demand is still evident. Selling a home now will guarantee a seller more money than ever before, but as government intervention once again poses a threat to value, it is important to take advantage before the opportunity slips away. Those dealing with unwanted properties, whether they’re inherited, needing repair, or in need of sale due to relocation purposes, now is the time. As the dates for rate hikes begin to approach, fast, cash sales are a seller’s best ally; even as they may seem lower than a market offer, they are guaranteed, don’t include agent commissions, contingencies, or appraisals. If you’re a homeowner in Greensboro and want to capitalize on the equity your home has gained since the pandemic, call Helpful Homes! This locally operated business helps homeowners achieve their goals when it comes to selling their homes quickly for cash, especially those hoping to cash in on the opportunity the government intervention has allowed before that opportunity slips away.