2018 Housing Market Forecast

When the housing market was growing out of proportion during the years leading up to the economic crisis of 2008, the rapid growth created something that became known as the “housing bubble”. As predicted by many experts yet not enough average citizens, the entire market soon came crashing down and destroyed the short-term economy of the country. This resulted in many issues for the financial industry that was closely tied to the housing endeavors and many people were pushed into foreclosures. Now, a decade after the unfortunate downturn, the housing market seems to be showing a much healthier growth.

First, one of the reasons that the crash was inevitable was due to the growth that largely exceeded the capacity of the demand and supply. In turn, the natural equilibrium was non-existent and the only way to retrieve it was to push the “restart” button which, in this particular case, was the aforementioned crash. Nowadays, however, the housing market has been growing at much more reasonable rates that have not topped a 5-percent yearly increase in construction projects. This enables the buyers and sellers to slowly increase their operations and ease into the broad change that affects pricing models. Thus, it seems that the proper forecast for the housing market must be depicted in form of a very positive picture.

What contributes to the current growth patterns is the fact that the markets are also witnessing an increasing number of high-income rentals. Given that the most common alternative to purchasing a home is to rent one, lenders who are increasing their prices are certainly contributing to people’s decisions to obtain a mortgage. This simply showcases a case of complement goods. Meaning, when the price of one of the assets in question goes up, the relatively “low” price of the other becomes more attractive. Hence why lenders who are deciding to spike up their leasing charges are giving rise to people becoming more curious about the prospects of just buying a property for themselves.

Lastly, the long-lived streak of mortgage rates that were below 4 percent made it possible for countless would-be homeowners to actually become one. As a byproduct of the recovering economy, the banks and nonconventional lenders had their mortgage interest rates set below 4 percent for a record-shattering 26 weeks. With such a rate, those interested in a high-end liability in form of a loan were invited to obtain one as the cost-benefit ratio outweighed their prospects of continuing to pay rent every month. Ultimately, if this trend continues, it would not be surprising to see the housing market reach its heights again. This time, however, the risk of a crash would be minimal as the growth is occurring naturally.

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