Quote:
|
Originally Posted by EroticySteve
Real Estate is still a safe investment. Location is key though.
Interest rates are keeping things affordable but there are many other factors. Look back to 1986, interest rates were no where near 6% but there was a huge buying frenzy maybe even bigger than what's going on right now.
|
Far too long ago, 86 is a bad example due to several other variables being present at that point, including inflation being tamed for the first time in 10 years.
But I digres...
This current real estate explosion was triggered by one thing: Falling interest rates. Rates control appreciation via demand, as they increase demand on inventory dramatically. Location is nice, yes, yes, all the other cute real estate cliches apply of course, but one dominant factor started this explosion in appreciation (falling rates) and it will end it as well (rising rates).
It's really that simple. As long as rates are below 6%, appreciation at high levels will continue in areas that deserve it. If rates climb above that level (signalling that the five year run is over) then appreciation will stall as it will take 4x as long to move inventory (sell homes).