When Interest Rates Are High Enough, Homeownership Is Put Out Of Reach
Interest rates and the spread of credit play a crucial role in the availability of credit to build houses. Most homebuyers do not pay capital upfront, mainly because they don’t have half a million dollars to invest in real estate.
Identifying housing market indicators is key to predicting housing market crashes. Indicators like building permits, housing starts, and new home sales data are released once every month, available for free download.
One of the most proven ways to identify signs of a housing market crash is to compare rental values to capital values. When the underlying properties of the economy change, the rental and capital values simultaneously change.
The S&P 500 Index is the main measure of the US’s economic health, made up of the top 500 blue-chip companies – some of them being housing-related. Investors often use global stock markets to express their opinions on real estate.
Compare Wages To Capital Values To Predict The Housing Market Crash
Another primary metric of affordability is to compare the annual wages of an average person in a particular neighborhood with the capital values observed in the neighborhood. This will give us the number of years a person has to work to buy a house in the area.