There are so many factors that influence the Real estate Market The days of price gouging is over!
Demographics such as age, race, gender, income, migration patterns and population growth. These statistics are often overlooked but significant factors that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics can have a large impact on real estate trends for several decades.
One example is the baby boomers and how they are significantly influencing the real estate market. The transition between these baby boomers to retirement is often of the more interesting trends.
There are numerous ways this type of demographic shift can affect the real estate market, but for an investor, some key questions to ask might be: How would this affect the demand for second homes in popular vacation areas as more people start to retire?) How would this affect the demand for larger homes if incomes are smaller and the children have all moved out? These and other questions can help investors narrow down the type and location of potentially desirable Real.
Interest Rates also have a major impact on the real estate market. Changes in interest rates can greatly influence a person's ability to purchase a residential property. That is because as the interest rates fall, the cost to obtain a mortgage to buy a home decreases, which creates a higher demand for real estate, which pushes prices up. Conversely, as interest rates rise, the cost to obtain a mortgage increases, thus lowering demand and prices of real estate.
Another key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economic indicators such as the GDP employment data, manufacturing activity, the prices of goods, etc. Broadly speaking, when the economy is sluggish, so is real estate. you should also be cognizant of the real estate property's sensitivity to the economic cycle.
Legislation is also another factor that can have an impact on property prices and demand. . Credits and deductions and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Being aware of current government incentives can help you determine changes in supply and demand and identify potentially false trends. For example, in 2009, the U.S. government introduced a first time home buyer’s credit to homeowners in an attempt to jump-start home sales in a sluggish economy. According to the National Association of Realtors (NAR), this tax incentive alone led to 900,000 homebuyers to buy homes. This was quite a sizable increase, although temporary, and without knowing the increase was a result of the tax incentive, you may have ended up concluding that the demand for housing was going up based on other factors.
The Bottom Line is that there are higher-level factors that play a significant role in moving the real estate market, but there are also more complex parts that come in to play. And although some of these factors suggest a clear-cut relationship between the factor and the market, in practice, the results can be very different. However, understanding the key factors that drive the real estate market is essential to performing a comprehensive evaluation of a potential investment.