Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by James Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, James.
James Nelson:
Thanks Brandy.
Brandy Auterson-Hurst:
So a lot of people expected high interest rates to hurt home prices. Now that we seem to be at the peak of the interest rate cycle, is that what we’ve seen?
James Nelson:
Yeah. We watched interest rates, or mortgage rates, most specifically go from about 3% a few years ago up to almost 8% just last fall. And a lot of people were predicting the real estate market had kind of fall apart. We did see prices weaken for a short time, right when the Fed started raising interest rates, but that was short-lived, and on a national average, real estate prices have been going up for 18 straight months. We’ve got a chart here that illustrates this. This is the Case-Shiller US National Home Price Index. And in the middle of the chart there, this is going back 30 years, but the middle of the chart there shows the peak of the housing bubble in the mid-2000s. And the result of that is that home prices declined for six to seven years after that. And what a lot of people kind of miss in this conversation is that extended downturn in real estate caused a huge underinvestment in the US housing market. And a lot of people during COVID were looking for new places, making a move, and that underinvestment really showed during that period of time.
Brandy Auterson-Hurst:
All right, so how could you see this impacting people who are watching at home?
James Nelson:
Well, it’s not something that impacts everyone equally. The lack of supply and higher prices aren’t great for buyers. But keep in mind, real estate has been notoriously local, and these are national averages. We’ve seen different pockets of real estate that act differently. So it just depends.
Brandy Auterson-Hurst:
All right, James. As always, thanks for joining us.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.