A Look at the Housing Market Recovery

By Michael Edlen
Special to the Palisades News

Now that the residential real estate market has begun to stabilize, there are several factors that can be identified for the 2011-2014 recovery.

Most of the housing upswing can be traced to the government’s policy of keeping interest rates quite low during this period. The lower cost of money enabled many people to be able to afford loan payments, which led to an increasing and steady demand for home purchases in nearly every area of the country.

Growth was additionally fueled by steadily growing consumer confidence in response to the apparent, though tepid, economic recovery.

While housing demand continued to in- crease, the supply of available homes barely kept up with growth. Many large nationwide developers had cut back on new projects from 2008-2011, creating a demand.

By 2012, the supply/demand ratio was magnified by an extraordinary increase in the number of developers purchasing tear-down homes to meet the rapidly growing need for new product.

Another reason for a continuing relative shortage of available houses resulted from people living longer and being more self-sufficient, retaining their homes longer than in previous decades. Moreover, many seniors decided not to sell their homes to save paying taxes that they would incur if they did, even though the after-tax proceeds would still be quite substantial for most of them.

Many of these factors could have been anticipated. However, the combined impact was a surprise to most people. When interest rates gradually begin to increase, due to global as well as national economic trends, we will inevitably see some housing adjustments as housing supply and demand become more in balance. For the time being, it appears likely that home values may continue to increase, although at a slower rate than they have until now.

Michael Edlen is ranked in the top 10 of all Coldwell Banker agents in the country and has sold more than $1.5 billion in home sales. He can be reached at (310) 230- 7373 or Michael@michaeledlen.com.

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