As the holiday season approaches fast in 2018, the property market appears to be hot. While the inventory is declining steadily, demand for homes has been growing fast. Buyers searching for homes are increasing in numbers and it is a situation of chaos in the market. Keeping these factors in mind, it becomes pertinent to find answer to the question whether it is the right time to make a move for buying or not. If you were to ask me this question, I would say it is a good time to buy if you can afford the high prices. If you think the high price tags of the homes are making sense to you, it is a good time to make a move in the market.
Dilemma for the buyers
One big problem for the buyers in a housing market where prices have touched the roof is to ascertain what the fair market value of a property should be. Prices continue to climb and so do rents for these properties. People conveniently ignore the fact that there is a limit to price rise and prices need to correct themselves at some point of time. Therefore, figures can prove to be misleading for many of the buyers. If you are an old warhorse, you must have experienced similar phenomenon before the housing bubble burst in 2009. Properties were getting sold as soon as they arrived on the market and buyers had become blindfolded because of increasing prices. Many of these buyers paid a heavy price later.
You need to pay attention to the rents
To avoid committing a mistake because of a hot market, investors make sure they take a close look at the rental income before making a move. The rental value of a property is the best clue you can get about the sensible price of a property. Also, if the rents have been increasing in the past, you can be reasonably sure that buying such a property can be a good bet for you. Increasing rents over a period also indicate price of the property will also increase in future.
Rents are mainly decided by the situation of demand and supply in the market. Sometimes demand is creation by high job growth as workforce needs accommodation near their workplaces. This demand is seen by entrepreneurs who create new housing units. But making homes is a long-term job and so rents continue to increase until houses have been finally built. They then start to climb down.
Another factor affecting rents is the flow of money in the market. There was loads of money pumped into the market by Federal Reserve, but it seems to be drying up as banks increase their interest rates. This means a slowdown is around the corner which will push rents downwards.
It is always better to be cautious than aggressive
If you are an investor, being optimistic is not wrong. But in a situation where prices of properties are touching the sky, it is prudent to be a little bit conservative and show restraint rather than being aggressive and upbeat. You never know when economy takes a downturn with a bad impact on the job market. It will push rents down and then the property prices. You should not think in terms of increased rents in future unless you live in an area that is experiencing a boom. Never make the mistake of increased rental income in future just as people hope for their salaries. In fact, being a little old fashioned on this count will make sure you don’t bear the brunt when prices start their descent.
Keep in mind that figures are not wrong inherently, but you should have the ability to interpret them correctly. Being conservative is the way to go in this scenario.
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