Why Home Prices Are GOING BACK UP AGAIN!
In the video titled “Why Home Prices Are GOING BACK UP AGAIN!” by Michael Bordenaro, he addresses the concerns of potential homebuyers who are baffled by the recent increase in home prices. Bordenaro explains that the housing market operates in cycles and that the current surge in prices is a seasonal trend during the spring and summer selling season. He supports this claim with historical data from the Case Shiller Home Price Index, which shows that home prices typically rise in the spring and summer and decline in the fall and winter. While the swings in home prices today are more pronounced than in the past, indicating a more volatile market, Bordenaro emphasizes that home prices can still rise during a recession, as evidenced by other data sets. However, he also warns that the current housing market is showing signs of seasonality, suggesting that prices are likely to start declining significantly. He attributes this potential downturn to factors such as high inflation, high interest rates, and unaffordability for the majority of the population. The future of the housing market will also be greatly influenced by the decisions of the Federal Reserve, with interest rates expected to remain high. Bordenaro concludes by stating that the drop in home prices from last July until now is the largest ever seen in any real estate season, and a similar trend is expected to continue. He suggests that real estate investment trusts (REITs) provide a safer investment option compared to investing with real estate syndicators, as they offer diversification and the ability to buy fractional shares.
The Housing Market Follows Cycles
The housing market is known to follow cycles, with prices fluctuating throughout the year. One significant trend is the seasonal nature of the market, particularly during the spring and summer selling season. During this time, home prices typically increase as more people are out buying homes compared to the fall and winter months. Historical data from the Case Shiller Home Price Index demonstrates this pattern, with prices consistently rising in the spring and summer and dipping in the fall and winter.
What sets the current housing market apart is the intensity of the price swings. Today, the swings in home prices are more pronounced than in the past, indicating a more volatile market. While the seasonal trend remains, the magnitude of these price fluctuations is noteworthy.
Home Prices Can Increase During Recession
Contrary to common belief, home prices have the potential to increase even during a recession. Several examples highlight homes being sold at higher prices compared to their purchase prices, despite the economic downturn. The last housing crash also demonstrated this phenomenon, with home prices going up during the spring and summer home buying season before falling again in the fall and winter.
It is essential to understand that the recession does not guarantee a decrease in home prices. Historical data shows that prices can still go up during recessions, depending on various factors such as market conditions and buyer demand. While the notion of a housing market crash may be worrying, it is crucial to consider the broader context and the cyclical nature of the market.
Factors Impacting Home Prices
Several factors contribute to the fluctuations in home prices, some of which are more prominent in the current market. Real estate has become detached from reality, primarily due to high inflation, high interest rates, and the unaffordability for the majority of the population. These factors create an imbalance in the market, making it increasingly challenging for potential buyers to afford homes.
Moreover, the decisions made by the Federal Reserve greatly influence the future of the housing market. With interest rates expected to remain high, potential buyers may face further obstacles in purchasing homes, exacerbating the unaffordability issue. The interplay between these factors is crucial in understanding the current state of the housing market and predicting its future trajectory.
Current Trends in the Housing Market
Currently, the housing market is experiencing the largest drop in home prices ever seen. From July until now, there has been a significant decrease in prices, indicating a downturn in the market. One area that demonstrates this trend is the Miami housing market, which is notably slowing down. This slowdown indicates a potential market slowdown in other areas as well, with prices expected to continue declining.
While these trends may be alarming, it is essential to consider the cyclical nature of the housing market. Just as prices can increase during specific seasons, they can also decrease during others. The current downward trend may be a temporary phase, with prices likely to stabilize in the future.
Different Investment Options
When considering investments in the housing market, there are various options to explore. Real Estate Investment Trusts (REITs) and real estate syndicators are two prominent choices, each with its advantages and considerations. REITs generally offer more regulation and lower investment requirements compared to syndicators. These characteristics make them a safer investment option for individuals seeking exposure to the real estate market.
One significant advantage of investing in REITs is the ability to diversify one’s portfolio. REITs allow investors to buy fractional shares, reducing the risk associated with investing solely in one property. This diversification provides a level of stability and flexibility in one’s investment strategy.
Overall, the housing market is subject to cyclical trends, with prices following seasonal patterns. While current trends may indicate a potential downturn, it is crucial to consider the broader factors impacting home prices. Understanding these factors and exploring different investment options can help individuals navigate the housing market effectively.
