Thoughts on Macro Market Trends

[Dan D.]

In the area I'm in, newspaper articles say the market is "slow" because of the number of transactions that are taking place are less than hoped / expected.  But it's a limitation on the supply side instead of on the demand side.

The story seems to say that first time buyers are frustrated because the market is too expensive because when homes are built, they are going for over-list in these very desirable areas.  Or the other issue is that there are no "starter home" new construction.  (An example in Mpls would be no houses for sale for under $350k in the nicer suburbs).

So your choice is either a beat-up house for under $350 in nicer areas, or new construction for the same price a few more miles out.  Anything else listed for less sells for more than seems appropriate for what you're buying, but that's where demand is taking it.

From the one college marketing class I took, this would tell me that prices would continue to increase until demand disappears / decreasing, or until the market somehow becomes over-saturated with affordable homes.

It appears there is a large group of millennials who have not yet purchased homes.  At some point they will want to move out or quit renting apartments one would think.  Also, baby boomers aren't downsizing as some had hoped.

The varying factor would be interest rates, but that can only go up which would limit the buying power.  

On the selling side, some people might be encouraged to sell their asset to make a higher rate on bond rates if interest does increase.  (Either those who have multiple homes or those looking to downsize).  I highly doubt that's something that would happen quick enough to flood the market however.

Thoughts on this.  Any other factors I'm missing that would tend to change the direction of the market?