The real estate market is sensitive to changes and is impacted by economic, political and social forces. It is difficult, if not impossible to predict coming changes in the economy. But it can be helpful to understand some of the influencing factors that affect the real estate market. This is not an exhaustive list, but a summary of some of the most pressing influences affect real estate today.
Immigration, migration from other cities or provinces, increase or decrease in family size and unemployment rates are all examples of demographic changes. Demographic changes can have immediate effects, but often the effects of demographic changes impact future real estate prices and availability.
With an increase in employment and economic prosperity, the demand for housing also increases. In periods of economic hardship and higher than normal unemployment rates, demand for real estate drops. If a large number of jobs are created or terminated in a given area, real estate prices can be impacted accordingly.
Interest rates are a key motivator in determining a demand for housing. When rates are high, the real estate market tends to take a downturn, as potential consumers remain in their current homes rather than taking on the risk of greater debt. If interest rates are low, mortgages become more affordable and consumers are more likely to consider buying real estate.
As market conditions change, governments and lenders may loosen or tighten lending criteria, which impacts the availability of financing. The easier it is for consumers to access financing, the more support the real estate market has to remain strong.
Substantial building activity normally accompanies a strong real estate market. However, if the supply increase outweighs consumer demand, real estate prices can trend lower.
Conversely, a sudden increase in demand higher than current building capacity can cause an upward trend in prices due to the time it takes to build additional inventory.
The ways in which each of these factors affects each other and the market as a whole is complex.
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RE/MAX Hallmark Chay Realty Inc. Brokerage