It’s not going to happen here. This so-called bubble is a euphemism for what most common-sense folks have known for a long time. In many areas of the country, and a few here in the Northeast—housing prices have been pushed way too high. Pushed by speculators, pushed by low or no-interest mortgages. Even though real estate continues to be one of the strongest investments you can make—forecasting gains of more than 10% annually is sheer speculation. To put this in perspective, our rising home prices here are still only gaining 8% annually adjusting for inflation. Yet, there is room for price growth here still. If, that is, economic conditions improve. What the media is not reporting—is that although personal income grew 5.8% last year, home price increases are outpacing personal income. The most important factor in a housing market is the economic fundamentals of the local economy. And the local economy is you and me, we are. So our watchword in maintaining a healthy real estate market is to be “reasonable”. Do not buy more house than we can afford simply because of an attractive low interest mortgage. And don't’ just consider the downpayment, think of the 360 after that.
Most Realtors® won’t tell you this, but the primary reason for the run-up in home prices here has been low interest rates, not housing values. Simply put—if you could afford a $250,000 house at 7.5% you could now afford $300,000 at 6% and prices went up accordingly. That’s not value, that’s just plain capitalism. If interest rates rise, this may result in price stagnation for our area, but not a correction. We here in the Northwest corner are in good shape, and should be for years to come so long as we exercise that increasingly rare trait—common sense.
Yankee New England Real Estate is a progressive Real Estate Brokerage that specializes in listing and selling homes and land throughout Litchfield County CT.
"Real Estate Done Right"
Dan Tolman, Broker, Realtor 860-738-1900
