When Will Real Estate Values Rise?

Wednesday, October 08, 2008 - By Gate Arty

Historically-speaking, home values have ultimately risen after dramatic declines. No kidding, right? Although there isn't any widely known or accepted scientific methodology to pinpoint the top or bottom of any market, experts tend to agree that the following signs indicate an upswing:

1. Real estate values stop declining and begin holding steady or selling side-ways. Although it may seem like commonsense, determining the sales price of a home isn't as easy as it may initially appear. It is important to evaluate sale prices across different segments of the market. For example, luxury homes continue to fall (and thereby lower the mean selling price of all homes in the area) while affordable homes have already showed signs of holding steady.

2. Inflation. While inflation tends to hurt those on fixed incomes, or those who put money into savings accounts, it tends to help those who own commodities and hard assets like real estate, since the price of goods and services tend to rise in relation to inflation.

3. Lack of alternative investments. One of the reasons real estate gained such a great deal of appeal in recent years was a lack of viable alternative investments. Following the burst of the "dot-com" bubble, investors were seeking new ways to obtain greater returns on their money. Savvy investors always gravitate toward the segment which provides the best return on investment. Real estate has experienced a major decline, but so has each and every other form of investment, right?

4. Eased lending standards. The availability of credit and affordable low-interest rates is yet another major impetus toward creating rising real estate values. Credit-availability allows potential home buyers to obtain mortgages. Increased mortgage output in the lending industry, leads to more sales in the real estate sector, creating more demand for housing, thus eventually increasing property values.

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