Real Estate Foundational Principles #1 – Real Estate Investing is Dynamic and Transitional

While I believe real estate investing is always a good investment and certain aspects do remain consistent, the real estate market is also dynamic and transitional. 2018 has demonstrated this principle with the new tax code and shifting interest rates. The volatility of the market can lead to uncertainty for short-term investors. However, over the long term, real estate continues to be a solid investment.

Changes in interest rates impact the real estate market because of the subsequent impact on mortgage approvals. As interest rates increase, homebuyers may find it more difficult to afford higher home prices that lead to higher monthly mortgage payments. This, in return, can impact housing prices. However, even with these shifts, the current Denver Metro market remains strong due to low inventory and high demand.

Changes in government leadership and legislation, like the new 2018 tax code, impact housing trends. When the federal government experiences changes, whether taxes are decreased or increased, our local economic climate is impacted. Even small incremental changes at the higher level impact the local real estate markets.

Housing prices also transition over time, with real estate prices usually increasing. However, as we saw with the 2008 economic crisis, home prices fell. While prices have recovered and increased since that time, it does serve as an example of how the real estate market shifts with larger economic trends.

One factor with the current real estate market is the low inventory levels. Low inventory levels are impacting the total number of homes sold. Demand remains high and homes are moving quickly and receiving multiple offers. Yet, the total number of homes sold decreased in February 2018 from the previous month because there was not enough inventory on the market to meet the demand.

Several standard considerations are used to determine the overall real estate market value at any given time. As we discussed, these include inventory levels, recent home prices, available mortgage loan packages and types, active buyers. Currently, across the country, as baby boomers age and downsize and millennials shop for their first homes, affordable housing demands are high. This is leading to a trend in more new starts at the entry-level price range. We also see that luxury home prices are increasing at a slower pace and make up a higher percentage of available homes on the market because they are not an option for the entry-level buyer.

Neighborhoods transform based on growth, gentrification and new economic development in the area. In some instances, it may seem to happen overnight. These changes can greatly impact property values leading to higher property taxes. This can cause a formally affordable area to see a shift in demographics. Many Denver Metro towns are experiencing this right now. The effect from the growth impacts all facets of the town’s economy including the need for more schools and roads, changing zoning laws to accommodate new commercial options and the loss of open space.

The dynamic and transitional nature of the real estate market makes finding a professional real estate agent critical. An experienced real estate agent is an expert in the local areas they serve. For buyers, they provide guidance for what neighborhoods meet your needs. Additionally, they follow monthly market trends and are aware of how specific homes should be priced in each area. They may have information about a new development or can offer advice on what to expect from an existing home based on the age, quality of construction, style, and features.

For sellers, a quality real estate agent helps accurately price your home so that you receive the best possible offer based on current market trends. With the volatility of the real estate market, a trusted agent is key to successfully selling your home.

Pricing real estate, residential or commercial has never been an exact science. It’s a combination of factors than continually adjust. When asked what a home is worth, the short answer is really dependent on what buyers are willing to pay and what sellers are willing to accept. However, data is available to help you and your agent make the best choice for your home and budget.

If you are in the market to buy or sell a home, let the experts at Redhead Luxury Properties guide you through the dynamic and transitional real estate process. We offer top-notch customer service and a customized experience to meet the needs of our clients. Contact The Redhead Luxury Properties Team today!

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