Real Estate and Mortgage Loans: The Circle of Growth
In case you haven't noticed the mortgage market and the real
estate market have been blazing a trail into the record books.
Never before has there been such explosive, sustained growth of
these two markets. The key factor here is that one seems to feed
off the other. Is this a good thing, or are the two markets
headed for a collapse?
You have analysts that will argue for either side. But, you need
to have a better understanding of how this process works, and
what elements have come together to allow this kind of growth,
before you can accept or disprove either argument. What has
happened to spur this kind of growth? Well, there are several
key factors that managed to come together at precisely the right
time, some of them attributable to natural disaster that has
generated a booming market. The first contributor was the
falling interest rate that has leveled out around 6 - 7%; the
second great contributor has been the increase in mortgage loan
options. There are mortgage products out there to fit every type
of buyer. The third contributor, (and this one is purely from
nature) was the horrific hurricane seasons of the past couple of
years, including the season we had this year.
How have all these elements come together to generate growth?
Here's exactly how: lower interest rates meant cheaper monthly
payments, refinancing options were open, and people could afford
to buy bigger homes for less. Add to that mix a more varied loan
market, and you have an increase in buying, selling, and
building. If you also throw in the fact that hurricanes
destroyed massive quantities of homes along the coast, and most
will rebuild, you have a burgeoning real estate and housing
growth market.
We have also managed to create an environment very conducive to
investment, construction, and resort development. Now, if you
factor in a booming market for investors, you have a prime
situation for increases in real estate value, increases in
construction, and increases in mortgage loans. How does the
average citizen ready to buy or build a home interpret all this
information? Well, it creates a wonderful situation for the
homeowner looking to sell a home, simply because the value of
the home should show a tremendous increase over the purchase
value, especially if you've owned the home for more than 10
years. However, if you're buying or building, you're not going
to like the situation. Why? Because home prices are up, thanks
to the rising real estate prices, and so are is the price of
building materials, needed to build a new home. We can attribute
much of this to high gas prices and hurricanes. The good news,
in all this, is the low interest rates. You can still borrow at
an extremely affordable interest rate.
For the consumer shopping the market, you need to really educate
yourself about the rising costs of real estate, the local values
in your community, and what mortgage products would most benefit
you, when you consider your individual objectives. If you're
like most, you aren't buying your home for an investment, and
you aren't buying with the intent to sell in a few short years.
In the market of today, it would be a wise choice to meet with a
financial advisor; someone that has a background in finance, and
can help you to clearly define your objects, and choose a
mortgage that will reflect those objectives.
Many of the individuals, who are the doomsayers, seem to think
that the market can't sustain this type of growth. That is has
occurred too quickly, and like the bubble of the stock market,
will burst, leaving many homeowners and mortgage lenders
"holding the bag" so to speak. But, you also have many of the
intellectuals that say the real estate market was due a burst of
growth; that it is normal, healthy, and we should have no
trouble sustaining this type of growth. Whatever the end result,
right now, the real estate market and the mortgage market are
hot items; if you own real estate, you've hit the jackpot. If
you're looking to buy, get ready to pay.