The housing market often reflects what’s happening in the economy. When times are good, there’s money in the economy to invest in housing. If times get tough, the Federal Reserve may intervene to reduce the pool of spending money. Unfortunately, when the Federal Bank starts looking at the possibility of an interest rate hike, it usually means there are leaner times ahead for homeowners and real estate investors alike. Keep reading to learn more about how the local economy influences the real estate market.

How Does the Federal Reserve Determine Interest Rates?

Many factors will cause the Federal Reserve / Central Bank to fiddle with interest rates. In general, though, it’s the state of the economy that determines the interest rate.

High interest rates make credit and mortgages more expensive, reducing the amount of money circulating in the local economy. Of course, some areas are harder hit than others when interest rates change.

The top end of the market takes a heavier hit due to significant price differences. After all, one percent of one million is a lot of money, but 1% of $400,000 can hurt more for lower to middle-income earners, which is the demographic where mom and dad investors have most of their finances tied up.

Why Are Interest Rates Critical to The Real Estate Market?

Interest rates influence the value of a property. When interest rates go up, credit gets more expensive, and property buyers’ borrowing capacity decreases. Buyers who may have been considering properties close to the city will need to look further out. In these cases, appealing suburbs outside the CBD can suddenly benefit from higher values.

Housing Starts Versus Home Sales

The housing market has two main sectors: home sales and housing starts. Home sales include established homes, while housing starts refer to new homes that have not yet been built.

The volume of housing starts, usually in brand-new suburbs with the latest, most up-to-date infrastructure, increases when the economy is full steam ahead. After all, who doesn’t love a brand new, shiny home that’s never been lived in before?

Housing starts will influence the local economy in many ways, including employment, land sales, raw building materials, and the businesses and support services that grow up around new suburbs. A weaker economy usually creates a corresponding drop in new home sales and a slight uptick in the sale of established homes.

Slow economies can have a dramatic effect on the housing market. Economic slowdowns influence the local economy as finance gets more expensive and the number of buyers in new home builds dries up. The reverse is true in a healthy economy.

Whatever the state of the real estate investment market, you can always find lucrative opportunities when you know where to look. However, it can be challenging to know where to put your investment dollars when you are not immersed in the property industry every day. Invest with confidence by talking with the experts who have successfully navigated the property market and consistently come out on top.

About Terry Chved

InvestWithTerry.com have been actively involved in the GTA area real estate investing for a number of years.  Our mission is to provide quality housing for quality tenants, while at the same time providing an above average return on investment (R.O.I) for our investor partners and ourselves.  It is truly a win-win-win way of investing!

Terry offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Terry.

For more information about Terry and his investment program, please call (647) 228-1035 and email him at terry@investwithterry.com or visit https://investwithterry.com/
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About Terry Chved

InvestWithTerry.com have been actively involved in the GTA area real estate investing for a number of years.  Our mission is to provide quality housing for quality tenants, while at the same time providing an above average return on investment (R.O.I) for our investor partners and ourselves.  It is truly a win-win-win way of investing!

Terry offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Terry.

For more information about Terry and his investment program, please call (647) 228-1035 and email him at terry@investwithterry.com or visit https://investwithterry.com/
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Many investors regard real estate as one of the best strategies to hedge against inflation because property prices over any given decade tend to trend upward. This article will discuss why inflation occurs and how it can affect your real estate investments.

What is Inflation?

The economy is dynamic, and many variables will impact inflation. However, at its core, inflation is a measurement of the increase in prices of goods and services over a period of time, including real estate costs and rent prices.

Inflation is influenced by the amount of money circulating in the economy. When more money is available, prices tend to rise, but there is also the expectation that prices will always go up eventually. A more straightforward way to think of inflation is that the dollar’s purchasing power degrades over time.

Real estate creates a reliable buffer against inflation because property prices increase over the long term. Investors also gain an advantage through cheaper interest rates and the ability to increase their yields by rising rental prices in line with inflation and supply and demand.

Why is Property a Reliable Asset Against Inflation?

Real estate investment is a long-term strategy. Property prices can fluctuate in the short term like any investment vehicle. However, holding an investment property over the long term is when the magic really happens.

As property prices rise, the original mortgage repayments remain reasonably stable. Of course, the Fed can make repayments more or less affordable if it decides to get aggressive with its interest rate adjustments. Even so, your repayment responsibilities will tend to balance out over the long term.

Rising property values are often matched by increases in rent. Should you keep a property for ten or more years, the value of the rent you can charge may have doubled, but your mortgage repayments will be similar to when you first bought the property. You will have effectively increased your rental yield two-fold or more.

Such increases in yields are difficult, if not impossible, to match in other investment vehicles. Plus, you also have the advantage of a significant increase in equity, as property values can often double or more over a decade.

In short, a long-term real estate investment strategy is an excellent hedge against inflation.

Investors can take advantage of lower interest rates to purchase property that will increase in value over time, often at higher rates than inflation. They can also pass on inflationary costs to tenants in the form of higher rents and profit from capital gains in property prices over the long term.

About Terry Chved

InvestWithTerry.com have been actively involved in the GTA area real estate investing for a number of years.  Our mission is to provide quality housing for quality tenants, while at the same time providing an above average return on investment (R.O.I) for our investor partners and ourselves.  It is truly a win-win-win way of investing!

Terry offers his investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact Terry.

For more information about Terry and his investment program, please call (647) 228-1035 and email him at terry@investwithterry.com or visit https://investwithterry.com/
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