Curious about the factors affecting real estate market health? Rising interest rates, high inflation, and fears of a potential recession have many people fearing the direction of the housing market.
But how does the housing market work, exactly? What are the factors that influence its trends and overall health?
In this post, our team at Your Home Sold Guaranteed Realty — The Nathan Clark Team will discuss the four main factors affecting real estate market health. That way, you can gain a solid understanding of how the housing market works. This knowledge can help you prepare and make more informed decisions about buying or selling a home in any market condition.
4 Factors Affecting Real Estate Market Trends
Home buyer demographics have the potential to influence which markets experience a boom or decline as generations enter different phases of life.
For example, younger millennials and Gen Z may prefer living in urban areas, while those looking to start families may move to suburban markets. Meanwhile, as baby boomers start to retire or become empty nesters, they may move out of the suburbs.
All these decisions end up affecting the supply and demand and prices in local housing markets.
Aside from location, demographics can also determine the types of homes that are seen as the most desirable. This also affects supply and demand and real estate trends more broadly.
First-time home buyers tend to move into smaller, starter homes, while families with young children may purchase larger properties. Retired-aged adults and empty nesters may be looking to downsize or even move into a 55+ community.
2. Economic Health
The housing market is closely linked to the economy’s overall health. The housing market is centered around supply and demand, which is impacted by economic factors such as:
- Interest rates
- Investor activity
- Employment levels
- Gross domestic product
When the economy does well, so does the housing market. When the market does poorly, that also ends up reflected in the economy’s health.
Interest rates in particular have a huge impact on the housing market and mortgage availability. In late 2022, interest rates had risen to a little over seven percent. As a result, mortgages became unaffordable for many home buyers and prevented new buyers from entering the market.
Technology also plays a role in the direction of the real estate market. As consumer attitudes shift towards wanting more tech-friendly and energy-efficient homes, it raises the standards for which homes sell the fastest.
Home sellers may find that they need to add certain amenities and features to make their homes competitive with brand-new construction properties.
In addition, technology affects home buying or selling a home faster by simplifying application processes, filing paperwork, and making it possible to tour a home virtually.
Using technology to make the buying and selling processes easier may have the effect of speeding up home sales because it can make people more confident about entering the market.
4. Government Policies
Lastly, government policies–whether on a federal, state, or local level– have a significant effect on the real estate market. This includes policies that offer things like subsidies, tax credits, and tax deductions.
These incentives affect supply and demand by encouraging or dissuading people from entering the market. Raising interest rates is one example of government policies that end up discouraging home buyers from purchasing homes. This has an overall effect of slowing down the market and lowering home prices.
Policies like tax credits, on the other hand, boost the market by making it easier for people to buy homes. In 2009, for example, the government introduced a temporary tax credit for first-time home buyers to improve home sales.
The federal government, along with many state and local governments, still offers first-time home buyer grants and programs meant to incentivize people to enter the real estate market.
We Can Help You Buy or Sell a Home in Any Market Condition
The real estate market goes through ups and downs naturally over time. But by paying attention to the multiple factors affecting real estate market health, you can make more informed decisions and be prepared to buy or sell a home.
Ultimately, the best way to understand the housing market is by working with an experienced realtor in your area.
At Your Home Sold Guaranteed Realty — The Nathan Clark Team, our award-winning realtors have served New England home buyers and sellers for 21 years. During that time, we’ve developed a reputation as one of the most successful real estate teams in the area.
On average, we sell homes 30 percent faster and for nearly eight percent more money than our competitors.
In addition, we’re well-equipped to help you buy or sell a home in a potential housing recession because of our buyer’s and seller’s guarantees. These guarantees offer a layer of protection that makes the process as risk-free and stress-free as possible.
To learn more about our guarantees or what it’s like working with us, give us a call at 401-288-3557 or fill out the form below.