The stock market took a blow to the face this month and that may seem like trouble, but it is more than likely just a sell off to take profits off what has been a monumental rise in equity value since 2016. The red hot stock market has been a major factor in the Fed decision to tighten things up with interest rates and that has in turn led to some minor softening in the real estate market, particularly for the single family residential market.
The Wall Street blues could lead to a more robust interest in putting all that sell off cash into mortgages that are now bringing investors a decent 4.5% - 5.5% ROR. That bodes well for buyers as a stable lending market will settle in nicely to our near neutral market conditions.
Analysts continue to project that the next two years will see home prices outpace inflation but the media is painting a grim picture because the rate of growth is expected to slow substantially. But double digit housing inflation is not sustainable and the market is simply settling in to a more normal growth rate.
Buyers should understand that even though prices are not skyrocketing, they are still inching upwards and getting in sooner offers more opportunity for equity growth, equity growth is good. Don't be misled by media reports of a slowing market to mean that prices are reversing and getting lower, they are not. Some overpriced listings are being reduced to points they should have been at all along but the median continues to creep up.
It seems like interest rates are stabilizing and historically speaking a 5% mortgage is still a fabulous deal. Here's to 2019 and solid year for real estate!
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