FORECASTING THE HOUSING MARKET2017-12-28 16:27:26 Posted By Amir Hamzehali
It's that time of the year again, where forecasting the market's future and next year's events are at the top of everyone's minds! When comes down to the housing market, it seems forecasting the future housing prices has the largest audience.
We all know that housing prices are affected by market supply and demand. We also know that the government is trying relentlessly to control the housing price appreciation by lowering housing demand. There is no doubt that the new policies introduced by the government, such as taxes and stricter mortgage rules will eventually reduce the market demand for housing. But we have seen not much attention to the effects of these regulations and controls on the supply side of the market!
Usually, a large amount of the housing supply in resale market comes from the market participants who want to upsize to a bigger or better property after selling their current homes. The market supply from these types of sellers which will be eliminated if the strict mortgage rules block their ability to move up the housing ladder! We should also remember that housing supply that comes from the market upsizers mostly contributes to the more affordable housing inventory.
The forecast for a lower future housing demand also discourages the construction of new homes by the developers!
At the end of the day, if market restrictions unexpectedly lower the market supply more than the market demand, these policies would result in reverse: higher real estate prices, especially in lower end and the less expensive side of the market!