When you are thinking about buying a home, you want to make sure that you get the best value possible. For that reason, you are looking for a legit way to make sure that you won't be paying more now than you could in the future. Of course, real estate brokers always want you to buy as soon as possible, so they will get their commission – which means it can be hard to find legitimate information on where prices are going in the housing market.
However, there is one indicator that is nearly always legit when it comes to the trends of real estate prices – interest rates. The formula is simple; when interest rates rise, so do housing prices. When interest rates plunge, housing prices go down as well.
Why? It's really pretty simple. When banks can charge higher interest rates, they make more money over the course of the mortgage. These higher profits are one way they are encouraged to make more home loans. Beyond that, because they are making more money they can afford to take on more risk, because the profits from the good mortgages provide a safety net for the inevitable mortgages that will end up in foreclosure.
This is why the most legit way to forecast if housing prices are going to go up is to simply track interest rate trends. This is also why you can expect housing prices to rise over the next two years.
Right now, interest rates are at some of their lowest points in years. But the economy is starting to improve, and the government wants to help that process along by getting banks to pump more money into circulation. They know that the best way to do that is to let interest rates gradually rise.
Therefore, you can expect interest rates to go up in increments over the next 24 months. As they do, home prices will follow the upward trend.
This makes today a smart time to buy a home, for three reasons:
1. Your overall interest rates and mortgage payments will be lower.
2. You will get a better home at a more competitive price.
3. The rising value of your home will make it a legit investment.