Where is this Market Going?

Where Is This Market Going?

By all accounts, this has been a resurgent year for real estate in America.  Interest rates have remained crazy low, new construction is picking back up, the resale market continues to be very strong, and the rental market continues to show strength too!  So what's next?

Interest rates: my prediction is that they will remain very low, probably through the end of next year.  Rates will definitelystart creeping up, which we are already seeing.  They certainly can't stay this low forever. I think you will see a rate of around 5% on a 30 year fixed by end of 2013, and it will continue to go up from there.

New construction: will continue on the upward trend, especially in the under $300,000 price range.  A real lack of inventory has caused builders to start breaking ground again on new homes.  I think this will remain the norm...I am sure we will see the normal seasonal slowdown this year in the fall/winter but by next spring, it should start to pick right back up where it left off.  This has been a very hot segment of the market.

Resale market: about the same as new construction.  Nationally, we have a pretty balanced market.  Nowhere near the overstock of inventory we had a few years back when it really was a buyer's market, now we are seeing good balance in the market.  It might even continue to trend to more of a seller's market.  That is exactly what we are seeing here in northern CO.

Rental market: will stay hot, and may even get hotter.  Unfortunately for renters right now, this is a landlord's market.  Underwriting on loans has gotten very strict and a ton of potential buyers are frozen out of the market because of that.  Those people are now renters, and they have been snapping up rental properties quick!  Rents have been rising across the board, by some accounts over 10% in the past year alone.  Again, that is what we are seeing here in northern CO, a sharp lack of rental inventory. 

A lot also depends on what happens with the debt crises overseas, and here in America.  Also, the election should have a big effect on the real estate market too.  The mortgage interest deduction (most Americans biggest tax break) could be on the chopping block.  Lastly, and I know I have mentioned this before, there is still a "shadow inventory" of foreclosed homes, and homes that are going to be short sales.  There is plenty of bad debt out there.  Depending on how fast that processes through the market could have a big effect on overall appreciation.  One thing I can say almost for sure, that we won't see the crazy double digit appreciation we saw before the bubble burst.  Hopefully the Fed learned its lesson, and will have more oversight into the future.