The housing market is still unstable. There are highly positive movements, but at the same time, this does not mean that the time to breathe a collective sigh of relief is here. It is very important to continue to be cautious and to understand just what housing market movements actually mean.
“Home prices posted the largest annual gain since housing bubble days in August, although the month-over-month gain slowed for the fourth straight month.”
This demonstrates that there is some light at the end of the tunnel, but since gain has also been slowing down for four consecutive months, it means a lot of caution should still be observed. So what do these figures tell us? Should we start buying again, or is it still too soon to tell?
Economics and Real People Are Not Aligned
It seems one of the main issues is that economics are not aligned to the actual behavior of people. Economics are based on figures and statistics. So, they will tell us that the spending power of the average American is on the rise, which should mean they are able to buy more.
However, it doesn’t consider that, on a psychological level, the average American is still very worried about finances and prefers to hold on to whatever money they have. This is demonstrated very clearly in Las Vegas, where house prices are rising, but nobody is actually buying, even if they can.
“Property prices in Las Vegas are rapidly traveling upwards, but it seems investors in US real estate aren’t interested. The Global Property Guide claims that strengthening values are actually sending buyers elsewhere. What’s more, the rental market is also cooling, as an increase in inventory tempers demand levels.”
The Economy Is Still Hurting
There is further evidence that economists are not getting things right. Evidence that people are still worried and that crunching numbers in a positive manner, working on historic figures, is actually damaging the economy, rather than helping it.
The recent recession is unprecedented, which means that we do not know what happens in a time of recovery. The last recession that could be compared to the one we have just been through was followed by World War II. After this, most countries were bankrupt, but governments were willing to get into huge debt to rebuild their country.
This is very different from how things are today. The government is still holding on to its money, as are everyday people. Hence, presuming that things are looking up, and pushing the economy in that way could potentially damage and reverse the situation once again.
“Contracts to purchase previously owned U.S. homes fell by the most in more than three years in September, a sign that a softer economy and a rise in mortgage rates are hurting the country’s housing market.”
A Positive Point
We know now that prices are on the rise, but that perhaps they shouldn’t be. We know that the push towards higher interest rates is potentially damaging what little recovery we have been able to achieve. We also know growth seems to be slowing down.
However, there is some light at the end of the tunnel as well. There is reason to believe that we are once again entering a seller’s market. “While the inventory of homes for sale remains tight, potential home buyers will get a bit of extra time to find the home they want without the pressure of watching home prices shoot up.”
The market always slows down after the summer, when people prefer staying cozy in their existing homes rather than going out looking for a new one. Real prediction can hence not be made until spring.