The May LANDTHINK Pulse revealed 73.85% of respondents believe the land market is not strong enough to sustain an increase in interest rates. With the overall economy improving, especially the labor market, the Fed has signaled that it will likely increase interest rates as early as midsummer. When the Fed acts, everyone planning on applying for a loan, those with retirement accounts, and money in the stock market will be affected.
It was the general consensus of the LANDTHINK audience that the land market is not strong enough to handle a rate increase. Those answering “NO” to our informal, online survey, likely think with an increase in rates, the real estate land market could not continue making strides since the economic downturn. The land market has stabilized since then, but a rate hike could negatively affect the land market in the long term. Temporarily it might be a good thing, luring those sitting on the fence to move forward with that land purchase they’ve been contemplating. In the long-term, affordability would be affected if an increase in interest rates were not offset by a growth of household income. High interest rates equals low demand for loans.
Those answering “YES” to the question, only 26.15%, do believe the land market is strong enough- at least in their part of the U.S. There are many determinants of the health of the land market, and markets vary in every section of the United States. This percentage of respondents most likely believe the land market will continue to rebound, provided lenders ease their loan standards for qualified buyers. Low interest rates are typically indicative of a weak economy, so an increase would mean a robust economy. Strong economic growth could make for a competitive, thriving land market.
The May Pulse posed the following question to our LANDTHINK audience: In your opinion, is the land market strong enough to sustain an increase in interest rates?
The LANDTHINK audience strongly expressed their opinion on the current state of the real estate land market. An overwhelming 73.85%, indicated a rate increase would crush a land market sill recovering from a long slump.
Here are the final results:
- 73.85% said NO
- 26.15% said YES
Thank you to everyone who participated and shared the Pulse with friends and connections in the land industry.
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If the government eliminates 1031 exchanges, what impact will it have on the land market? Click here to answer the June Pulse question.
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