Interest rates, Rent, and inflation are all skyrocketing! What is going to happen to the real estate industry and how can you protect yourself?
Hey if you are a homeowner, investor, or interested in buying property here in south Louisiana, we have all the data that you need.
So Real Estate prices are a function of Supply and Demand, and Months of Inventory is how we can keep a pulse on what is happening with our supply and demand. Looking at our inventory going back to 2012, you can see we have hovered around 5 and 6 months of inventory which would be considered a balanced market.
Starting in 2020, we have experienced well below average inventory levels and have reported inventory levels to be under five months of inventory. This lack of inventory has created a Sellers’ market, and the average price in January 2022 has increased from $244K to $265k. That’s a 9% Increase Year over Year.
So where are we going?
Well, going back to 2012, we have experienced a moderate appreciation of 2.85%. This is well below the national average at 4.14%, so I do not believe we are in a bubble. Actually, with the impact of inflation, the experts believe that prices will most likely continue to rise over the next few years and beyond. As an example, if we continue to experience appreciation at 2.85% over the next 20 years, our average price will be at $440K, but if we follow the National average appreciation, in 2044 our average price will be over $595K.
The most optimistic experts say we could see a 62.5% appreciation by 2026. The pessimists say 23.7%. And when we average out all the predictions, we get a 43.3% appreciation by 2026. So as you can see, all signs point to prices continuing to rise in the long term.
Homeownership is really a hedge against inflation because as you can see in this slide, over the past 5 decades home prices have increased faster than inflation.
That means someone buying a home today can lock in today’s cost, protect themselves against the rising cost of inflation, and lock in that monthly payment going forward. So it becomes mission-critical for renters to understand this dynamic of buying now, if they can.
Renters take on additional risks by waiting to buy. Most experts are forecasting higher interest rates, higher home values and if you look at the Rental market going back to 1988, Rent has only continued to increase with no signs of that slowing down.
So at the end of the day waiting to buy will cost much more money.
I hope you found this information valuable.
If you are interested in buying or selling real estate, I would love to help. Stay tuned for next week when I will break down Pending’s, foreclosures & interest rates.
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