Whether you’re in the market to buy or sell commercial property, it’s essential to know what factors might come into play in terms of the next crash.
If you’re looking for an accurate real estate market forecast, it may seem impossible to determine exactly what, when, and how the next crash will occur.
Read on to learn about a few factors that could cause the market to nosedive so you can be better prepared for whatever comes your way.
If commercial real estate prices seem to skyrocket suddenly, this can be a red flag for an oncoming crash. When prices soar quickly, it usually indicates that there’s a real estate bubble.
All financial bubbles burst eventually, which will cause those incredibly high list prices to crash. Pay close attention to current listings and look for prices that seem out of line, or those that seem to go up to a very high asking price overnight.
Many investors will try to get the most return as soon as possible before the market crashes, which can be why you see prices jump to jaw-dropping levels.
The U.S. Treasury uses something called a yield curve that pays close attention to current note yields. When this curve is “inverted,” it’s usually a serious sign of an oncoming recession.
When the yield curve is inverted, interest rates for short-term Treasurys are higher than the long-term yields. Investors then assume that the short-term is much riskier than the long-term. This can cause the commercial real estate market to take a serious hit and prices to drop significantly.
If the interest rate to purchase commercial property rises, it can cause the market to crash. Potential buyers will stay away from loans that have high rates or unappealing terms.
Using rates as part of the real estate market forecast can help you determine if it’s a good time to sell. The lower the current rates, the better your odds are at not only making a quick sale but selling at a higher price. When interest rates go up, buyers shy away from purchasing property and this can cause sellers to lower their asking prices dramatically.
It’s important to note that higher rates don’t always mean a crash is coming. However, they can be a good indicator of what’s to come in terms of the big picture for the commercial real estate market.
There is never one singular thing that can cause a real estate market forecast to predict a guaranteed crash. However, if prices rise along with interest rates at a rapid pace, it could be a red flag that you should pay closer attention to.
If you’re looking to sell your office, industrial, or retail property for a great price, visit our website and contact us today for a consultation.
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