If you own a home you’re in luck, because it looks like the housing market has finally recovered from the crash. Numbers from the Standard & Poor’s Case-Shiller Index, a composite of housing prices throughout the country, shows that real estate prices are finally higher than they were in 2006. Yes, after a decade, the market has once again hit an all-time high.
The spike in home prices is especially pronounced in urban areas. For example, Seattle saw the biggest boost, with a price increase of 11 percent, followed by Portland at 10.7 percent. On average, the 20 largest American cities had a 5.2 percent price increase in 2016.
Possible explanations for the bump include a recovering economy, the millennial generation coming of age and, most of all, low interest rates on mortgages.
What Does This Mean for the Real Estate Market?
It’s likely that interest rates are going to increase soon. It’s possible this could reduce the number buyers and bring the prices back down. Alternatively, as cities continue to grow and the supply of houses remains close to steady, we might see the market continue to boom.
Like many things in business, high housing prices are something of a double-edged sword. A strong sellers’ market will likely please the millions of American who rely on their homes to build wealth. On the other hand, renters and buyers may struggle with more expensive housing costs, especially if they live in the city.
The great investor, Warren Buffet, once said that to invest well in the stock market you must “be fearful when others are greedy and greedy when others are fearful.” It might be wise to consider this advice in the real estate market as well. The worst possible outcome is to pay a high price for a home that you might have to sell for cheap later. If you are looking at a home right now, the crucial question is whether rising prices are sustainable. As the housing crisis has already shown us, this can be a hard thing to predict.