Douglas Schmidt - REALTY EXECUTIVES Boston West

Posted by Douglas Schmidt on 9/11/2017

Forget the fact that rising housing prices are often used to signal a strong economy. For many house hunters, three or more months of consecutive upticks in area housing prices are too much to swallow. It's not hard to understand why.

Despite signs of economic recovery, new home buyers want low housing prices

Following the Great Recession, homeowners lost a painful sum of money on houses that they were trying to sell. It left some homeowners with no choice except to stay in a house that had become too expensive. This was especially a fact for homeowners who had experienced a job loss or a severe cutback in their work hours.

What happened was that housing prices rose dramatically prior to the housing bubble then sunk, leaving some homeowners responsible for ballooned mortgages. When these same homeowners tried to sell their houses, they either took a loss (as home values tanked) or they found themselves staring at a house that had been on the market for three months or longer.

Housing price costs of stronger economy

Even if the economy continues to get stronger, it could prove costly for house hunters to buy residential property when prices are going up. Slight economic shifts could put these house hunters at risk of defaulting on mortgages they barely afforded when the economy was good. It's why knowing the signs of potential housing price increases is valuable.

As with most real estate issues, a good first pass is to check with local residents. Find out what current homeowners are planning to sell their houses for and why. Do a little research and surface competitive house prices in areas you're thinking about moving to. Also research prices in low costs areas. Stay open to moving to lower costs areas that offer safety, great commutes, education,entertainment and business opportunities. As you conduct due diligence, think about the signs of rising housing prices.

Spot potential increases in housing prices early

Here are some signs to look for if you're in the hunt for a new house and want to avoid buying in an area that's about to experience a rise in housing prices. Although these signs may not cover every situation when housing prices could spike, the following signs do offer clues that you may want to pay attention to as you continue your house search:

  • Professional sports arenas are under development - Ask Brooklyn, New York residents how rents and housing prices can soar after a professional sports arena is constructed in the area. Housing prices rose so much following the opening of Brooklyn's Barclays Center that some long time Brooklyn residents made plans to move from the area so that they could, once again, better afford housing costs.
  • Shopping centers - If retailers expect an area to grow, housing prices could start creeping up.
  • New quality schools - It's not every day that you see new schools being constructed. Should this happen, it might be a sign that developers and investors are planning to sink money into the area.
  • Increasing investor attention - Although investor attention is good, an abundance of investor attention could find current homeowners and housing developing raising prices.
  • Entertainment options are expanding - Similar to professional sports arenas, a growing number of entertainment options could attract more affluent home shoppers. This could cause you to see a spike in area housing prices.

Waiting to see how far housing prices will climb may be the last thing that you want to do if you're in the market to buy a new residential property. Do yourself a favor and look for signs that an area is strengthening and growing. If an area becomes significantly attractive to house hunters and investors, don't be surprised to see area housing prices head upwards.

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