It’s difficult to go online and not find some type of information or conversation about the housing market throughout the country. Some parts of the country might see a recession, some might see a correction and some may not even see a slow down simply because of where they are located as well as a variety of conditions unique only to their area.
Imagine if you lived in a three-bedroom house that was worth $400,000 and across the street from you is a neighbor with an identical house, same year of construction, same age on the roof and nothing else unique about their property. However, their house is worth $500,000. Why such a drastic difference? While it’s unlikely that you would have such a discrepancy on properties that close together, even being on the different side of a certain street in a town can drop your home value.
States like Arizona, Kansas, New Mexico, Mississippi and others are already starting to see issues come up with home purchasing. The reason for this is extremely complicated because it has to do with a combination of raising interest rates, higher than recent inventory levels, all the new home purchases that have occurred over the last five years, taxes based on your state and more.
One thing that often is forgotten about when home prices come up is the actual cost of living in an area as well as the opportunity to make income in that area. For example, if you were an architect and you live in Missouri you may not be able to find consistent work but your cost of living will be very low when compared to other parts of the country. However, if you were to move to a state like Florida or California or even Texas you would not only have a better opportunity to find quality work, but lucrative work as well. While the cost-of-living is higher, so are you opportunities to make more money.
The next thing you have to look at when understanding the real estate market is the area you live in. Sticking with Florida as an example, there are areas throughout the state that may see home prices drop anywhere from 10 to 25% over the next year or two. However, there are also areas that if that should happen will not see a reduction in price simply because of the demand for housing in the community.
Part of the demand could be because of job opportunities, and another reason for such high demand in the area could also be because of the quality of the community including how clean and safe it is, as well as local schools and other options that residence can enjoy.
A lack of inventory has been a major factor in why home prices have been going up, especially in the last year or two. This is actually a big factor on why certain parts of the country will go through potential corrections or even a recession, and why others may not see the same impact. Throughout the states of Florida, California, Texas, New York and other states that are seeing high numbers of people move into them each year, inventory is still low and therefore prices are not expected to drop as drastically or at all, even with higher rates.