Forces Behind The Real Estate Market

In the world today, most people’s wealth is to be found in real estate. This is true to America, where majority of Americans have their wealth tied to the real estate. Real estate is a promising investment. Many investors are lured to the real estate because it is a lucrative, and promises of good returns in investment. But what exactly drives the real estate market? Four main factors can be singled out: economy; government regulations; interest rates; and demography.

Role of government in real estate

Forces Behind The Real Estate Market

Government plays a considerable role in the real estate market. Policies and regulation passed by the law makers will either depress the property market or make it vibrate. Measures like tax credits, deductions, and subsidies augers well for the real estate.

An example is the first-time home buyer tax credit introduced by the united state of America government in 2009. This incentive was to encourage home sales in a sluggish economy.  The outcome of this move was an increase of 900.000 home buyers; this is according to National Association of Realtors (NAR).

Real estate and economy

How well the economy also affects the value of real estate.  The wellness of economy is measured by factors like gross domestic product, employment data, manufacturing activity, the prices of goods and services.

The effects of the economy, nevertheless, are depended upon the type of the real estate and economic cycle. For example, when there is an economic downturn, real estate investors in hotels will loss more, as compared to those in office building. This is because, hotels can be considered as a short term lease, which can be avoided by customers when times are bad. The office buildings, on the other hand, are long term leases that can’t be changed in middle of an economic downturn.

What of interest rates?

What of interest rates?

Your chance to own a home, in addition, can be determined by the interest rates, charged by financial institutions.  As the interest rates fall, the cost of mortgage decreases, consequently, creating a high demand for property, this pushes the prices up. Equally, as the interest rates rise, the cost for mortgage surges, as the demand for property and prices for real estate falls.

Population composition factor

The composition of the population has a bearing in real estate, too. The age, race, gender, income, migration patterns and population, determine how real estate is priced and what types of properties are in demand. A demographic shift can affect real estate in a number of ways. For instance the demand for second homes in popular vacation areas might be altered by an increase in number of retirees.  Or demand for larger homes in case the incomes of the owners become smaller and the children have moved out.

You might also like

Emerging Global Real Estate Markets It was an area much neglected in the past and not taken seriously; real estate today plays a key role...
Choosing A Real Estate Agent Every one in his life needs to buy or sell property. And for this, he has to consult a real estate agent....
How People Make Money by Investing in Houses When investing in real estate, one common issue that needs pondering is whether to buy and sell or buy...
Real Estate Prices: What You Really Need To Know It has been assumed that the real estate prices will always be on a steady upward spiral. Therefore,...
10 things you don’t want to hear from your real estate agent Here are Ten Things You Don't Want To Hear From Your Real Estate Agent When You Go To Settlement On Your...
Debt Consolidation Companies

People who liked this Post also read

  • 8 Signs Of Increase In Property Prices In Your Area
    Above mentioned eight indexes are necessary to judge your neighborhood is on upswing or not. Property market normally remains consistent and not change quickly, however by using above mentioned facts one can not only keep in eye on the rates in his area b...
  • Emerging Global Real Estate Markets
    Global real estate market is emerging as necessary tool for property management and related issues. All investors and brokers are now more conscious, as many countries are adopting REIT structures and there is a hope for its immense growth in the near fut...
  • How to Make Money in Real Estate
    Investing in real estate can be good for you as compared to other options like the stock market. Real estate can return great profits. However, you need to learn about a few important things that will shape your decision about investing in real estate....
  • Mistakes Real Estate Investors Should Avoid
    There are a number of issues that real estate investors should take into consideration. It is not only a matter of paying money to buy the house, there are other financial matters to look out for. There are some very common mistakes that investors need to...
  • Best Ways For Funding For Dream House
    One can easily determine the interest rates directly from a borrower's credit score. It is highly recommended that a borrower should get credit reports from all three nationally recognized credit reporting agencies before they go for shopping around for d...

is an experienced journalist.

Leave a Reply

© 2012 Loan Mortgage Credit!. All rights reserved.