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The Real Estate Price Will Not Rise Indefinitely.

The theory goes something like this. More land cannot be built, but the population will steadily rise. As the demand for land, thus homes, increase, and the supply shortens, the prices of real estate will keep growing. This cycle will go one indefinitely. This writeup aims to give you a more realistic picture of the real estate.

When you go down history, it is apparent that till 2004 the price of homes kept on soaring. After that year, the market flattened. It was in 2007 that the prices started declining and by the time 2010 came around the market has crashed enough to reach the same prices as in the year 2004.

Presently, the value of homes in most parts of the country is rising again because of increasing demand and low supply. But the same does not apply to all regions.

The Two Real Factors That Effect House Prices

When we see trends in real estate, we see them at a national level. This is a gross error. A potential homebuyer should consider the market of their city. Just because Orlando is booming with houses doesn’t mean that San Francisco will too. Prices of homes differ from city to city and state to state. Sometimes, even two neighbourhoods in the same town can have vastly different price points.

Real estate business person pointing towards the screen which displays real estate graph.

The second factor that makes an impact on house prices is the mortgage rate. When the economy is healthy, mortgage rates increase. A high mortgage means more interest which in turn reduces the allure of homes. On the other hand, when rates are low, i.e., the chances of people buying homes rises because the credit taken will be less. Mortgages have an auxiliary influence on home prices, but they do have one.

To Buy A Home Or Not To Buy One

With the reality of real estate more complex than what theory says the question of buying a home or not becomes complicated. If you have an exit strategy in hand, then buying makes good sense. Without a doubt, the value of a property does increase over time. So, selling your home 10 or 20 years down the line will be profitable. But if you plan to live in the abode for all of your life, you will not gain any profit from it.

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