For agents whose real estate careers survived the 2008 bubble burst, scrutinizing real estate trends in hopes of protecting yourself from subsequent disasters should now be a common practice. What things should you look toward as a means of predicting if things might blow up in your face, yet again?
These real estate trends may signal a market that’s about to pop:
• Shaky loans
Subprime lending is risky. Though the FHA still offers loans with minimal down payments (3.5%), lending practices deviating from current elevations in underwriting standards may signal a need for caution.
• Over-extended leverage
A bubble means lots of leverage – banks accepting minuscule down payments from buyers as a means of securing the purchase. Current trends this year point to a cycle devoid of leverage. The average buyer is putting down about 35%, and in some markets, cash buys are up, such as in New York City where 45% of transaction are cash.
• Home prices outpacing salaries
When home prices rise and salaries don’t, people feel forced to rent or driven to eke out an existence in a home they can barely afford. It doesn’t take a genius to realize that this isn’t sustainable. If business isn’t rising in outlying markets, but only in main metropolises in combination with shaky loans and leverage overextensions, keep watch with a wary eye. (Keep in mind here, we do not mean rapid home appreciation, but unsustainable rapid price appreciation, which fundamentals don’t support.)
• Slowing foreign interest
Markets in need of correction may see a drop in international buyer demand. Toss in a natural disaster or disease outbreak, like Zika, and it may be time to break out the ponchos. Case-in-point: Miami.
• Rising interest rates
Rising interest rates typically coincide with a drop in affordability, and thus housing demand.
Real estate trends have you feeling the pressure? Properties Online can help ease the bloat. Discover how today.