HOW WILL THE FED IMPACT THE HOUSING MARKET?

When we look at the news headlines in the financial markets, we can see that most of the attention is placed on the multi-year rally that is still unfolding in the major stock benchmarks.  There is good reason for this but those that are more interested in real estate investments might be wondering if the same opportunities exist in property investments.

This is a complicated question, to be sure.  But it should be understood that all financial markets are cyclical in nature -- and this means that periods of low price valuation cannot last forever.  And since stocks have already made most of their recovery, it is a good idea for investors of all asset classes to consider adding more exposure in real estate.

 Potential For Rising Mortgage Costs

 The first issue at hand here is when (and to what extent) the Federal Reserve will start raising interest rates.  This can produce a drag on the real estate market because it suggests a growing potential for rising mortgage costs.  At the moment, the trends are still positive.  Overall, home sales figures are still showing robust trends, according to data collected by Mobile Home Insurance Quotes.  This is encouraging because when home sales are strong in these areas, it tends to bode well for the rest of the real estate space.

 Going forward, we will need to pay special attention to speeches made by voting members at the Federal Reserve.  This will be the best indicator in determining the degree to which the Fed will influence trends in the housing market.  Higher rates raise costs for potential homebuyers, and this can produce obstacles for the number of homes that will likely be sold on a quarterly and yearly basis. 

 There is still strong potential for growth, however, and this is because real estate is still looking very attractive on a relative valuation basis.  Stock markets have been rallying strongly for the last five years but since this has not been the case in real estate, we can assume that there is still some very strong upside for investors that are able to buy in before these trends unfold.  There is always going to be the possibility that higher interest rates from the Fed would slow down some of this potential for growth.  But the underlying trends still look relatively clear in terms of direction and in the likelihood for making gains.