(Newswire.net — November 18, 2016) — Homeowners all over the country are excited to see prices for homes rise in their respective neighborhoods, and new interested homebuyers across multiple generations are more interested in and willing to invest in new properties. It’s a world of difference from the housing market crash of 2007, which sent prices plummeting, lost thousands of Americans their homes, and eventually caused one of the greatest global recessions in our economic history.
But what exactly is causing this resurgence in home prices and spending? And should homeowners be optimistic about future growth or cautious about an incoming correction?
Why the Housing Market Is on the Rise
These are some of the main reasons why spending is on the rise:
- Easy mortgages. For starters, banks have recovered from the financial crisis and are starting to make it easier to secure mortgages. Most financial institutions are dropping mortgage interest rates, being more lenient with credit histories and other evaluation factors, and making it easier for young prospective homeowners to invest in their first properties. As a result, more millennials are buying homes, and people who were unable to purchase a home just a few years ago now have the option.
- Additions and improvements. One of the aftereffects of the housing crisis was an implicit knowledge that selling a home would result in a loss—so homeowners got comfortable. They started making major improvements to their homes, from updating the windows to landscaping the exteriors to attract wildlife. This, in turn, made homes both more attractive and expensive, which resulted in an increase in interested homeowners.
- Dwindling inventory. The laws of supply and demand dictate that when supply starts to fall, consumer interest and prices start to increase. While there are still plenty of homes available to buy and new developments expanding to new areas (more on that in a moment), inventory is starting to dwindle, serving as both an effect of and a facilitator of the housing recovery. The decrease in supply and steady-to-rising demand is making it a better seller’s market.
- Booming stocks. It also helps that the stock market has been rallying, hitting all-time highs in recent weeks and months. The United States economy is doing well, and individuals have more capital to work with, which means they’re more willing to spend money and make major investments (like a first-time home). There’s no guarantee how long this will last, however; some financial advisors have spoken out in fear that a bubble has formed, with stock prices far exceeding their fair valuations. If that’s the case, the stock market could be in line for a correction in the coming years, but until then, prices are high and consumers are happy to spend.
- Reduced corporate and industrial investment. There are also signs of reductions in both corporate and industrial development in homes; fewer companies are buying up real estate for their own endeavors. This pull from the market means more homes are available for everyday consumers, which drives up interest and pricing in residential neighborhoods.
- New suburban development. Finally, there are new suburban developments springing up all around the country, expanding existing neighborhoods or adding new ones on the outskirts of major cities. This is making it easier for new homeowners to find the kinds of housing and neighborhoods they want, and spiking new demand for home purchases overall.
How to Take Advantage of the Boom
If you’re interested in selling your house—whether it means downsizing, investing in a bigger property, or just living somewhere else—this could be a good time to do it. You’ll still want to take a good look at the prices of homes in both your new and prospective neighborhood (especially compared to historical prices and trends). If you have multiple properties, it may also be a good time to sell. Then again, since we’re in the early stages of a resurgence, your best bet may be to hold on and wait for further growth—possibly investing in some new improvements in the meantime. The housing market is difficult to time reliably, so evaluate your current living situation and follow your best instincts.