In the US, commercial and residential real estate account for a significant portion of a person’s wealth. In fact, the Federal Reserve’s recent Consumer Finances survey revealed that over 65% of all Americans own their primary residence. The following four factors are responsible for driving the housing market:
Demographics – the data that describes the make-up of the population is commonly known as demographics. This would include:
- migration patterns
- population growth
Despite being a significant factor in the different housing markets and the real estate industry, it is all too often one that is overlooked. It affects the pricing of real estate and what types of properties that are currently in demand. Whenever a country undergoes a major shift in its demographics, it can impact housing market trends for decades.
The economy – America’s overall economic health can have a significant impact on real estate values as well. We typically measure the economic health of the US with certain “economic indicators” such as:
- employment data
- GDP (Gross Domestic Product)
- manufacturing activity
- prices of consumer goods
Whenever there is a downswing in the economy, the same holds true in the housing market. However, economic cycles can impact different forms of real estate in varying degrees. While it is important to be aware of which portion of the economic cycle we are in, it is equally as important to understand how a property can be sensitive to the cycle itself.
Government policies and subsidies – another factor that can have a considerable impact on property demand and pricing is Federal Government legislation. Some of the means for temporarily boosting housing demands include government subsidies, income tax deductions, and tax credits. You can determine how supply and demand changes and identify which trends are accurate or false by understanding current government incentives.
Interest rates – this is probably the most significant factor when it comes to having an adverse or positive affect on the US housing market. When it comes to getting a home loan or mortgage, it’s always wise to have a calculator handy so you can research the interest rate. Nothing influences a person’s ability to buy a home more than the interest rate. As the interest rate drops, so does the cost of a mortgage. Consequently, when this happens, demands rise and so does the price of housing.
So, what’s the bottom line? The overall size and scale of the housing market make real estate very attractive to investors. Investors can choose to invest directly in physical properties or indirectly by utilizing managed funds. For additional information on factors that can have a significant impact on the housing market or to discuss your needs with a knowledgeable representative, contact Bridgepoint Funding today at (925) 478-8630.