When John Eilermann St Louis property developer first became the chairman to the real estate industry council of the Federal Reserve Bank of St. Louis, he spoke openly about how hopeful he was regarding real estate prices across the city. What people like John could never have predicted of course was that just over 12 months later, the world would be plunged into criss. Eilermann has once again been speaking lately abut his predictions for the real estate in Missouri, and this time they are far more ominous. This seems to be the sentiment which has been echoing throughout the real estate industry and this is exactly why we expect house prices to tumble next year.
Paying It All Back
Because of the money which the government has borrowed to support citizens during this crisis, we are naturally going to be in a situation whereby we have got to pay that money back. In order to do this we will see interest rates raised and that is going to impact many across the country in terms of being able to afford their mortgage. Many will move to lower cost properties and more importantly we are likely to see many move into rented accommodation. There is likely to be a desperation to move which results in the acceptance of low offers and thus the real estate market will continue to fall.
There is no market on the planet that reacts well to uncertainty and the real estate market is one which may well be durable, but is going to react badly to these levels of uncertainty. People are not taking out mortgages because they are unsure of whether or not they will have a job, real estate developments are on hold in the wake of the pandemic and people are no longer sure where is the safest place to be. This uncertainty prevents large scale investment and when there is little investment to pump up valuations, we will see the price slowly fall.
There are many who are also in fear that their housing benefits may be stopped as the Federal government seeks to repay the huge amount of borrowing which it has been forced to do this year. This of course would be an enormous blow for the housing market, not to mention for all of those people that would be affected by this.
Whilst on the one side it is a devastating impact on the country that housing prices may fall, if you are in a position to invest this could certainly be an opportunity that is going to present itself to you. The key will be to stay patient and to grab any opportunity with both hands. Thankfully, throughout history the real estate market has always shown great buoyancy and even when there have been setbacks it has always continued to rise, and that has never been untrue. Keep an eye on that real estate market next year.