What direction will real estate prices take?

What direction will real estate prices take?
February 3, 2021

St. Louis, MO (MO.Properties) Everybody is asking the same direction.  What direction will real estate prices take with the pandemic?  Over the past year, home prices, in certain areas, have increased substantially due to low supply and high demand created in part by low interest rates.  However, when you look at the overall real estate market, the future may not be as appealing.

Commercial real estate demand will most likely decline, short-term to intermediate term, as businesses close, and more companies turn to technology as consumers are shopping online.

If you look at the S&P 500 Real Estate Index, it has declined over the past year by -3.49%, according to the S&P Dow Jones Indices chart dated today, February 3, 2020, compared to the Dow Jones Composite Average gained 8.06% in the same period.

It is tempting to rush to buy with these low rates.  As we have written, low rates are probably here to stay for a while.  Mortgage brokers will use low rates to get the deal done, but do your homework as we have encouraged.  It is most likely that these low rates will remain low to support and stimulate the economy.  Low rates are forced by the fed to create more business activity, but business challenges are overwhelmingly challenging in the current environment.

Real estate is somewhat different than the stock market.  The stock market can change trend directions spontaneously, whereas, real estate prices and mortgage rates can have more predictable trends and signs of reversal making it somewhat more predictable to trend followers.

We do not make recommendations, but merely give you facts and logic to consider and/or to discuss with your mortgage broker and/or realtor.