"You can make even a parrot into a learned political economist - all he must learn are the two words "supply" and "demand"

You can make even a parrot into a learned political economist - all he must learn are the two words "supply" and "demand"

- Thomas Carlyle

Born in 1795, Thomas Carlyle was a Scottish essayist, historian, and philosopher. It is interesting that even back in the 18th century, the concept of supply and demand was such a well-known and accepted principle. That principle is still as true today as it was back then.

Lately, the focus is on what effect rising interest rates will have on the real estate market and impact of world events on the economy. These are certainly important questions.

If history repeats itself, the short answer, is “very little”. While it is true that interest rates and the world economy have some influence on the real estate market, by far the largest influence has been, and still is, supply and demand.

When I first began my real estate career in 1985, interest rates were in the range of 15%, and we were still selling plenty of houses. Since then, interest rates have dropped regularly, and dramatically. While rates are starting to climb back up a little, they are still very attractive, especially compared to years ago.

Unemployment is very low right now, and that is also a driving force for housing demand as more buyers can qualify for a mortgage.

Mortgage rates are good, and unemployment is low, so the demand is certainly there. Let’s look at the supply side of the equation.

I’ve written several times that the current available home inventory is the lowest in several decades. The biggest reason is that it is still not attractive for home builders to put up the number of new homes like we saw before in 2007. Supply chain issues and extraordinarily high prices for lumber, copper, and everything else, simply make new construction less affordable.

While interest rates may slow our super-heated real estate market, it will most certainly remain strong for many years to come.

Jonathan R. Krause, President

Gambino Realtors | 815.282.2222 | www.GoGambino.com