If you’re one of the many people who are looking for opportunities to become a player in the housing market in the US, then you will probably want to know what the deal with the current housing market is. To put it short, the current housing market in the US is becoming more competitive than ever before. What does this mean for the average real estate investor?
It could mean different things depending on the role you’re looking to take in the current housing market. In general, the most defying characteristic of the US real estate market at the moment is the rising demand in addition to a supply that falls short of meeting the high demand.
However, there are also a number of other factors that are greatly affecting the current housing market.
What do a high demand and a low supply mean for the current housing market?
The high demand for new housing units could be seen as a positive sign for real estate investors who are looking to sell or rent out their real estate investments as well as real estate investors (or developers) who are looking to build new real estate properties. One of the most basic rules in business is that when demand rises, so do prices as well. This means that people who are looking to rent out or sell their investment properties in the current housing market can do so at a higher price, and they are likely to find more tenants or buyers despite the new higher prices.
It also means that the competition in the current housing market is higher than ever, and that homes are being sold at a faster rate. “Home sales jumped nearly 9 percent in March compared with March 2016, even as the number of homes for sale plunged 13 percent, according to a new report from Redfin, a national real estate firm.
That demand dynamic further increased competition in the market, resulting in the fastest average sales pace since Redfin began tracking in 2010. The typical home went under contract in just 49 days, down from 60 days a year ago.
Additionally, if you’re looking for an opportunity in the home construction business, now is a good time to start building. The current housing market is short on supply, which means that supplying new houses in the market as a real estate developer will pay off.
Another factor that is affecting the current housing market is mortgage rates.
Although mortgage interest rates have slightly increased over the past year, the number of real estate investors who are borrowing money to finance their real estate investments is still on the rise.
As it is with the high demand/high price in the current housing market, the same applies to interest rates on mortgages. More and more people (especially millennials) are looking to get into the real estate business, which means they are looking for financing through loans. And the higher the demand is for loans, the higher the interest rates will become.
What does this mean for the current housing market?
When you combine the increased interest rates with the increased prices of real estate properties, you’ll notice that they kind of cancel one another for the real estate investor. New investors are paying higher interest rates on their mortgages, but at the same time they are making more money through their investment properties due to the increasingly high demand.
Additionally, more banks and mortgage financing companies such as Fannie Mae and Freddie Mac are facilitating the process of giving out mortgage loans to both first-time home buyers and buyers in expensive markets, which only pumps more life into the current housing market and makes it more vital and dynamic than ever before.
Related: 8 Real Estate Market Trends in 2016
Other factors to be taken into consideration…
First of all, let’s make it a point that this is the age of millennials, especially when it comes to the real estate market.
According to Zillow, half of all property buyers are under the age of 36. This means that millennials make up the majority, or at least a very large portion, of the actors in the current housing market in the US.
If you are a real estate investor, then you should be taking this into account when setting your investment strategies and marketing trends to match those of the new generation on the rise. For a more in depth look at the effects of millennials on the current housing market, read our blog.
Secondly, sellers are expected to maintain their edge over buyers as demand is expected to continue to increase throughout the year. This means that competition is going to be fiercer than in the previous years as new real estate investors compete over the short supply to gain the highest profit from the high demand.
Last but not least, the political situation in the US is greatly affecting the current housing market. The new Trump administration, his pledges to increase spending on infrastructure and to cut taxes, and his crack down on immigration are all expected to have a neutral-to-positive impact on the current housing market. For a more in depth look at the effects of the Trump Administration on the US real estate sector, read our blog.
The bottom line is…
If you’re looking to invest in the housing market this year, then go ahead and do it. Don’t feel intimidated by the increasing competition or the growing mortgage interest rates. The current housing market looks more promising than in the previous year, and there are no indicators that it will be slowing down anytime soon.
If you’re still unsure of the state of the current housing system or if you do not feel confident that you can compete with all the other real estate investors who are joining the market, then why don’t you go ahead and get a head start over the other investors by using our online real estate market analysis tool Mashvisor?
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So go ahead and visit our website and use this easy real estate investing “cheat” tool before everyone else starts using it and the competition becomes fair again.