Where Will Housing Prices Be in 10 Years?

Many real estate experts predict that housing prices will continue to rise. So how high can they go? There are many factors that influence real estate prices, but it's important to know the trends so you can plan for your future. In this blog post, we'll take a look at what is driving up real estate values and why some say housing prices may never return to their pre-recession levels.

If you asked me 10 years ago I would likely told you that prices (then) were already testing outer limits...yet here we are with people paying well over $1,000 a sq foot in many major markets! (That's a million dollars for 1,000 sq ft).

One things for sure - Great real estate deals are getting harder to come by and real estate investors are having to get much more creative.

Where will housing prices be in the next decade? I don't think anyone knows for sure, but we can make some educated guesses based on current trends and real estate predictions. Let's take a look at what factors (both positive and negative) could be influencing real estate prices.

- Negative factors -

INTEREST RATES

Short of going negative... they really can't go much lower so we're already running on "max" in terms of how much money people can afford to borrow.

INCOME

Wages have increased over the years but not nearly enough to keep up with the cost of living. In many parts of the country people are spending 1/2 of their income on housing. Now whether you own your home or rent - spending 50% of your paycheck on housing puts tremendous stress on people.

TAXES

There are various tax advantages to owning real estate and many of those advantages are under siege. Regardless of where you stand on the matter, the fact remains that the less profitable it is to "own something" the less valuable it will be as an investment.

On the other hand, there are several factors that lead people to believe that today's prices will appear cheap 10 years from now.

- Positive factors -

DEMAND

We are experiencing one of the greatest housing shortages ever right now. In some parts of North America we're 10+ years behind on providing enough housing. Low supply + high demand = higher prices

GOVERNMENT INTERVENTION

Not sure I'd call this a "positive" but it certainly is when it comes to increased housing prices. The government doesn't want to see another housing crash and is doing everything it can (directly & indirectly) to make it easier for people to afford a home. Keeping interest rates low, funding various loan programs, subsidizing rental housing and construction of additional rental housing are just some of the programs and I don't see those programs slowing down anytime soon.

INFLATION

It's a reality we all live in. Prices are rising and with it are the "replacement costs" of housing. Whether it's the lumber, glass, concrete required to build a home or the skilled labor to make it happen... everything costs more today than it did 10 years ago. I don't see a reason for this trend to change anytime soon.

So, what do you think? Where will housing prices be in the next decade and why?

Marcin Drozdz

The information contained herein is for general guidance on matters of interest only. This information contained herein are not intended to provide you with any advice on financial planning, investment, insurance, legal, accounting, tax or similar matters and should not be relied upon for such purposes. www.marcindrozdz.com is not a financial or tax adviser. You should assess whether you require such advisers and additional information and, where appropriate, seek independent professional advice. www.marcindrozdz.com, its subsidiaries and affiliates, are not responsible in any manner for direct, indirect, special or consequential damages however caused arising from your use of the information contained herein.