The property market is, at the time of this writing, very dynamic. We can even think of the current situation as one of those volatile periods that are typically pregnant with a great deal of opportunity, but also more dangerous than more stable times. One of the engines of this increased property dynamism has been home price appreciation and how it has been a fairly significant factor in recent times. CityHome Collective, a real estate brokerage out of Salt Lake City, say that the best way to deal with house price appreciation as a buyer is to understand the factors involved more fully and to create strategies for the future.
Why It is Happening – A Cause for Optimism
House price appreciation is rarely a cause for optimism among buyers. For that matter, it is rarely a cause of optimism among any housing market analysists. The reason for this is that house price appreciation is well remembered as the cause of the housing price crash some fifteen years ago, a period of property market history which few remember fondly. However, there is compelling evidence that recent appreciation will not lead to a crash as it did then.
The reason for this is closely related to the actual “why” of recent house price appreciation. And for buyers looking to successfully navigate the market at this challenging time, understanding this “why” is vital. It is generally accepted that things would be better if appreciation slowed a little, but recent appreciation is caused by fundamental factors which do not presage a crash. Such reasons include a supply shortage and lower rates clashing with an increased demographic demand. Before the infamous crash, appreciation was caused by poor credit quality, low ratios of debt-to-income, and veritable tons of equity. These dangerous factors are, thankfully, not present today.
Rising Mortgage Rates
Before going on to explaining how best to navigate the new property market as a buyer, it is worth pointing out that price appreciation is currently happening in tandem with another phenomenon that is making things tricky for buyers. This is rising mortgage rates, which all property analysists know ultimately saps the purchasing power of buyers as they must reckon these higher ongoing mortgage costs with the price of the property itself.
Nevertheless, this too is a multifaceted problem. Yes, rising mortgage rates are sapping purchasing power, but they also cause those looking to move to sell their current properties as quickly as possible, especially if they have buyer cash flow issues that necessitates a successful sale before they can effectively become buyers themselves. This means that, with the help of a good brokerage which can identify these sellers and sift out the ones conversely reluctant to sell, buyers could find it easier to snap up a property quickly before either price appreciation or rising mortgage rates make that impossible.
How to Tackle the Problem
So, this is the situation that faces buyers today. Combined with limited supply and rising mortgage rates, it certainly presents a challenge. Ultimately, however, these phenomena have made the homes which are available, in some cases, easier to get. The problem is then a question of timing. Moreover, as a buyer, the best question to ask yourself is, “can I afford it now?”
If you can, then it could be wise to act quickly and secure your move before things get even more expensive. However, if you are not looking to move imminently, then there is good evidence to suggest that many of these oppressive factors will ease in severity before too long.
