Vivian Ayako Mudavuda

4 Real Estate Factors that Drive the Market Meta Description: Do you know real estate represents an important portion of most people’s wealth? If you want to invest in real estate, consider these 4 factors that drive the real estate market. The size and scale of the real estate market make it an attractive and important sector for many. Here we will look at 4 main factors that drive the real estate market and investment. 1. Demographics These are the data that reflect the composition of a population, such as age, race, gender, income, migration patterns, and population growth. If a shift occurs in a nation’s demographics, it will have a large impact on real estate trends for several years. A good example is, the baby boomers born from 1945 to 1964. They represent demographic trends that can significantly influence the real estate market. Their retirement which began in 2010 was bound to be felt by the market for several years ahead. We have several ways that this type of shift can influence the real estate market. Frequently asked question:> What will exactly happen to the demand for second homes in popular vacation areas as many people start to retire?> How will smaller incomes and family sizes (when children start to move out) affect the demand for larger homes? The answers to these and many other questions will help you narrow down the type and location of potentially desirable real estate investments before demographic trends start. 2. Interest Rates It has a major impact on the real estate market. Before you consider buying a home with a mortgage, calculate to see how different rates of interest can affect purchase prices. At times when interest rates decline, the prices of a bond move up, because its coupon rate becomes more increased, and the prices of bonds decrease. Same way when interest rates decrease, REITs’ high yield becomes more attractive and the prices go up. If the interest rates increase, the yield on a REIT becomes less attractive and the prices are pushed down. 3. The Economy The overall health of the economy is a major factor that affects the value of real estate. Is measured by economic indicators like the GDP, employment data, manufacturing activity, and the prices of goods. Note that when the economy is sluggish, so is the real estate market. It’s important to be informed of the cycle the economy is in and a real estate property’s sensitivity to the economic cycle. 4. Government Policies and Subsidies Another factor that has a sizable impact on property demand and prices is legislation. Tax credits, deductions, and subsidies are the ways the government can temporarily boost demand for real estate. Being informed of the current government incentives will help you determine changes in supply and demand and identify potentially false trends. We have an example, of the U.S. government that introduced a first-time homebuyer’s tax credits in an attempt to jump-start home sales in a sluggish economy. According to the U.S. government accountability office, 2.3 million people took advantage of the tax incentive. Without knowledge of tax incentives, you might have concluded that the demand for housing was increasing for other reasons. P.S: Note that if you understand well the factors that drive the real estate market, you will be a comprehensive evaluation of a potential investment. With the 4 factors be assured of well well-managed real estate market.