Will US Home Prices Continue to Rise in 2017?

The question of whether US home prices will continue to rise in 2017 is complex and multifaceted. Factors such as inflation, the behavior of the Rentier Class, and broader economic trends all play a role in the current housing market dynamics. This article will delve into these factors and provide insights for both consumers and investors.

The Role of Inflation

Inflation is a key driver of home price increases. When the cost of living rises, it often leads to higher home prices as buyers are willing to pay more to maintain their living standards. However, the impact of inflation on the housing market is not uniform. Inflation can have varying effects depending on regional economic conditions and the overall health of the economy.

The Rentier Class and Home Prices

The Rentier Class, a group of individuals who derive income from property rentals, are playing a significant role in the current housing market. These investors, often utilizing the low-interest-rate environment to secure loans from the Federal Reserve, are actively acquiring middle-priced properties with cash. Their influence on the market means that regular consumers face challenges in competing with these institutional investors. The Rentier Class's ability to pay higher prices due to their financial resources and access to cash can significantly affect market dynamics.

Economic Trends and the Great Reset

The broader economic context, including the concept of 'The Great Reset,' also shapes the housing market. This term is often used to describe a significant shift in how the economy operates, potentially affecting long-term trends in home prices. While the Southwest is currently unique due to water and power shortages, which may lead to a decline in home valuations, other regions could follow suit if the issue becomes more widespread.

The Future of Home Prices and Investment

In the long run, home prices are likely to increase. Historically, periods of decline alternate with periods of upward movement. The Obama years saw a period of stagflation, where slow economic growth and high inflation coexisted, leading to a stagnation in home values. While it is possible that the current market is at the top of a cycle, speculating in real estate without creating value or entering niche markets can be risky.

For those looking for appreciation in real estate, creating something of value or entering a niche market might be more effective strategies than simply buying and waiting. Speculation in real estate, much like gambling, carries the risk of loss. However, with current interest rates at historically low levels, it is challenging to envisage a scenario where many individuals do not own their personal homes or become long-term landlords.

It is important for consumers and investors to remain informed about the economic landscape and be prepared for potential changes in the housing market. Staying attuned to factors like inflation, the behavior of the Rentier Class, and broader economic trends can help navigate the complexities of the market.