When the real estate market crashed more than a decade ago, it brought housing prices down to stunningly low levels. As expected, the market recovery was impressive. In fact, today’s housing prices in most areas are substantially higher now than they were during the pre-crash peak. Despite the slow crawl of interest rates upward, the housing prices continue to trend upward as well. Are you wondering what is driving home prices higher?
Supply and Demand
The housing market functions on the economic principles of supply and demand. Because of low interest rates, many people are actively looking for their first home or are planning to upgrade or downsize. Comparatively, the ratio of available homes to buyers has been hovering near a record-low level.
Low Interest Rates
Mortgage interest rates plummeted around the time of the last real estate market crash, and they have stayed incredibly low for many years. Low interest rates are the basis for more affordable mortgage payments. Some people who may have sat on the sidelines if rates were higher may be enticed to jump into the market. Interest rates have been creeping upward recently, but this has not had a significant impact on housing prices yet.
While supply, demand and interest rates have had an incredible impact on the housing market, other factors are at play as well. For example, when inflation is taken into account in relation to current wages and home prices, today’s rising housing prices are still stunningly low in comparison.
Are you trying to decide if now is the right time to purchase your first home or to transition into a new home? Personal finances are a major part of your decision-making process, and our team at MortgageDepot is ready to help. To inquire about our mortgage loan programs, contact the MortgageDepot team today.
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