With the headlines increasingly filled with good news about an improving economy, it would be easy to prematurely celebrate the impending return of higher duplex values.
However, before we all start thinking happy days are here again, we need to keep two things in mind…
Interest rates impact value.
When the economy improves, interest rates tend to rise; just as they did this week.
And for every 1 percent increase in rates, a prospective duplex buyer can generally qualify for $10,000 less of a loan.
Yes, rents will increase as more people start living on their own once again. And when rents get too high, people with good credit start looking for homes.
But the real estate boom of 2003-2006 happened when people with bad credit were able to qualify for loans.
I’m no economist, but I can’t imagine the banks are going to be willing to lend to those folks any time soon. And demand and supply for anything is what determines its value.
When it comes to supply, there’s the small matter of all that shadow inventory…