Are you trying to grasp and understand what moves the real estate market today? Take heart, so are millions of other folks too. Remember, as we paint in broad stroke 4 factors that are the moving forces behind the real estate market will vary to some degree in your market.
Four key factors standout that impact real estate prices, availability, and investment opportunities.
1. Demographics - Covid 19 and the "shut down" of the economy during Covid 19 brought about a great migration within the United States. Buyers and Sellers were looking to move out of crowded cities and into the more rural areas. Employees were working from home and sought houses that were large enough to accommodate their family and a small office.
Not only did people move, but major corporations uprooted themselves and relocated into more favorable economic zones where restrictions were minimal.
The aging of the Baby Boomer generation also impacts the real estate market as many of them opt for the warmer weather of Florida and the great Southwest. Their children are grown, starting their own families, and Boomers think more about downsizing.
2. Interest Rates - No one will deny that interest rates have had a major influence on the real estate market. The 0% interest rates have been quickly replaced with 6-7% interest rates on a 30-year fixed-rate mortgage. As the interest rates rise, the cost of mortgages increase as well resulting in a lower demand.
3. The Economy - The overall state of the U.S. economy reflects the current administration's efforts to offset some of the post-Covid bail out efforts for those forced out of work and companies forced to "involuntarily downsize". Inflation has reached a 40 year high, unemployment is a problem, and wages have not offset rising consumer products costs.
4. Government Policies and Subsidies - There is a mixed bag of policies at work both to improve the economy and drag it down. The Federal Reserve has tightened control of the flow of money to the market by raising interest rates and the Legislature has enacted policies to assist first time home buyers through tax credits, deductions and subsidies. The Right hand gives while the Left hand takes.
Bottom Line: These four key factors significantly impact the real estate market. Understanding these factors is essential to assessing where the market is and where it will be.
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