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Real estate, especially in Southeast Michigan, has been a bit of a roller coaster affair. It can be difficult to determine if the market will continue to improve or continue to run amok. Here are some aspects of the local market to watch, as these could indicate the local market’s overall health and whether the ride is moving up or heading down:

The Fed and Interest Rates: After years of incredibly low interest rates (which helped homeowners but hurt pensioners and savers in general), the Fed inched up the prime rate by 25 basis points. So far, this has not led to a buying  frenzy, but many economists believe that the Fed’s actions may spur some on-the-fence buyers to make a move, prior to any future rate hikes.

High End of the Market: Crain’s reports that there is finally some movement in homes in metro Detroit valued over $1 million and that their days on the market are now coming down.

Renting versus Owning: The average age of homebuyers has been creeping up as of late with younger borrowers renting for longer or even continuing to live with parents. This could be the result of a soft jobs market, which has experienced little gains in wages, despite a decrease in unemployment. The depressed salaries, combined with soaring student loan debt, has seemed to put a damper on what used to be considered the unassailable American dream of home ownership. If the market is good, then some of these potential buyers will have been saving and will be motivated to purchase a home. If the market is weak, they will continue to rent, although…

Continued Upward Prices on Rents in Many Urban Areas: As the millennials and post millennials continue to leave the suburbs and exurbs en masse, their mere presence in city centers is pushing rent prices sky high, not just in traditional high-rent districts like New York, Chicago and San Francisco, but in smaller cities, too.

Different Kinds of New Homes: With the student debt crisis affecting such a large segment of the population, there is a desire for affordable housing, even in the most desirable locations. Builders are highly attuned to these needs and are experimenting with materials and methods to keep the costs of houses down, but still create a product that sells.

Baby Boomers Staying Put: Unlike the generations before them, today’s baby boomers aren’t packing it in, downsizing or heading to warmer climates. They are staying put, partly because their houses lost value, partly because they are healthier than their parents. But this “staycation” on the part of the baby boomers is contributing to a shortage of homes on the market at many price points, contributing to overall higher prices for houses, which could be exacerbated with even higher interest rates.

Like many aspects of the economy, there are a multitude of factors to consider when analyzing the local and national housing market.

The post The Real Estate Road Ahead: Signs to Notice appeared first on Dawda PLC.

Here are some of the factors that will influence sales, prices, supply and demand in the real estate market:

Demographics: Two segments of the population, Baby Boomers (born between 1946 and 1964) and Millennials (born between 1980 and 2000) are the demographic groups to watch.

The Baby Boomers are retiring in droves. This should mean an uptick in demand for downsized homes, including one story homes and ranch type houses, condominiums and patio homes. In addition, of course, would be the selling of larger family homes as this group slowly moves into senior living facilities.

The Millennials are an interesting group to watch. They are more saddled with debt than their parents. They have been much slower than previous generations to purchase both houses and cars. Their lack of dependence on cars means that the suburbs and indeed the exurban areas are less attractive to them, and so these areas might see some oversupply as regards this slice of the population. In the same way, urban areas or areas that have a walkable, urban feel may become so appealing to this group that demand will drive higher prices.

Interest Rates always become a factor in home purchases. Right now, the interest rates are still quite low. If buyers perceive that the interest rates will be heading up, there may be a surge in purchasing. However, new regulations on home loans and home closings will continue to lengthen the entire process from loan origination to closing, so nothing will be felt immediately.

Foreign Investment isn’t something that lots of people think about. But the U.S. real estate market and indeed the economy as a whole, is still a bulwark of stability in an unstable world financial market. Foreign investors are buying up urban commercial property like crazy, causing a bit of a supply crunch. Will this investing move into regular neighborhoods or only be felt in high dollar city centers? That remains to be seen.

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