1. The economy
The Great Recession that happened in 2008 to 21012 highlighted the connection between the macro economy and real estate. Real-estate related jobs such as construction and mortgage financing underwent significant property depreciation. Note that even other local macro-trends can influence housing prices. For instance, the income growth in California was at 1.2% in the first quarter of 2015 compared to the national average of 0.9%. This increases the spending power of buyers which in turn also increases real estate prices. The demand for housing is often considered income elastic (luxury good) which means rising incomes lead to a more significant percentage of income being spent on houses.
To sum it up, the state of the economy impacts the real estate market, as the consumers' ability to hold up to property prices depends on critical factors such as the GDP, income growth, manufacturing activity, and unemployment.
2. Interest rates
As interest rates rise, mortgage rates also increase, which consequently lowers the demand and price of real estate. The real estate crash of 2007 proved the global impact of the real estate market increased awareness of how interest rates and loans are used in home buying. If things aren’t looking good abroad, it might affect your ability to sell homes domestically. Be in the know on what’s happening in the global market and with foreign investment as these play large roles into the expectations of the local market as well.
3. Location
Properties within the proximity of establishments such as a slew of restaurants, parks, and schools, the price of houses are higher. In line with this are zoning restrictions which indirectly affect land value and directly impacts tax value. Do take note that local builder activity and local regulations in the area can dictate new home supply, and prices react to the abundance or the lack of supply of houses.
While properties remain where they are, what happens around them inevitably affects its value. The price of a house is not only dictated by what it is today, but also what it can be 5, 10, 20 years from now. New roads, schools, and other attractive infrastructure can affect the desirability of a location almost in an instant. However, even though no one can predict developments and declines with absolute certainty, a professional who knows the community in which a property is located will be able to provide valuable insight.
