If you have been paying attention to the housing market recently, you may be familiar with the rapidly rising cost of homes in areas across the country. At the same time, bidding wars, the cost of lumber and limited inventory have resulted in a special situation. If you are a homebuyer, you may be worried about finding a home at a reasonable price. You may also worry about entering the market just before the bubble bursts and prices plummet. If you are a seller, you may be wondering if you can find a new home to move into or if you should hang onto your house for a bit longer. After all, housing prices are skyrocketing, and selling too soon could equate to thousands of dollars or more in missed profits.
While there are justifiable concerns about a potential bubble bursting, there are strong indicators that we may be years away from seeing a slowdown in the housing market. Consider that basic economic principles tell us that prices will rise when demand increases and supply is constrained. These factors do not necessarily mean that the bottom will fall out of the market. The last housing crisis occurred, in part, because of risky financing options. These led to increased foreclosures that ultimately had a domino effect on the market. Currently, however, risky financing options are not yet easily available.
What does this mean for homebuyers and sellers? Until the cost of financing or the ease of obtaining risky financing change, you may not see a major change in the market. Other factors also come into the picture, such as an increase in new construction, the unemployment rate and more. While it is not possible to accurately predict the housing market, there are strong indicators that the current market conditions will continue at least for the next year or two.
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