The real estate market is a complex, dynamic system that can be challenging to comprehend at first glance. However, if you take the time to study it closely, you will understand key factors that drive its ups and downs. If you are on the lookout for land for sale or even a home or apartment for sale or rent, you will be interested to know how the price of real estate can fluctuate and why.
The Key Factors Driving The Real Estate Market
The economy is the most crucial factor that drives the real estate market.
Hirav Shah says, “One of the most deciding factors that drive the real estate market up or down is the economy. When the economy is strong, people have more money to spend investing in real estate. But, unfortunately, the reverse is also true; people are less likely to buy or sell homes when the economy is weak.
These days, people find that they have less and less money, even though they are working the same amount of time, if not more challenging, to earn. The reason is the cost of living in many places has skyrocketed, which is also affecting the real estate market in many places.”
Interest rates are another significant factor in determining how much people will pay for homes.
Hirav Shah adds, “A country’s interest rates will also determine the money amount people will be willing to pay for homes or land. If interest rates are high, then the real estate value is likely to decrease because fewer buyers can afford it; if they are low, prices could go up.”
Supply and demand also play a role.
Hirav Shah explains that, as with any other goods, the supply and demand for real estate is a significant factor in determining what homes are worth. If there is little supply but lots of demand, the price will be higher than if there were an equal number of both or more houses on the market for buyers to choose from.
This supply and demand factor is also directly affected by the economy. If the economy is struggling, fewer people will afford real estate; buyers with more buying power can push prices up if they are doing well.
This supply and demand factor also considers many homes on the market, for example, during a housing boom when construction companies are working at full capacity or in an economic recession where houses sit unsold for months without being bought by anyone. When this happens, it is called “over-supply,” which means that many properties come onto the market, but few sell because not enough people can afford them (or don’t want to buy). This puts downward pressure on prices as sellers have little incentive to drop their asking price since most potential buyers will not afford it.
Demographics also influence home prices, as families with young children tend to look for larger homes near good schools.
Hirav Shah says that demographics are another vital factor that drives the real estate market. Families with young children, for example, often look for larger homes near good schools and closer to cities and their workplaces. As the population of a city changes, so too do the types of homes in demand. If an area experiences a lot of growth, developers will likely build more apartments and condos; if the population ages, retirees might move into the area and drive-up demand for single-family homes.
While families will want to invest in a home with a garden and enough rooms to accommodate everyone, singles will be more than willing to invest in a smaller home, such as an apartment or condominium, if it is in a desirable location.
Hirav Shah adds that the market also depends on the type of real estate. For instance, if one lives in a country with many forests or lakes, owning property around those places is very popular for people who want fresh air and privacy. As well as this, if there are stunning views from mountain tops, these make excellent properties to live in too. Another factor affecting the real estate value would be how close it is to schools, hospitals, and other public amenities like parks, etc. This matters because future buyers may not wish to purchase something with easy access to such things. These factors combined will then determine whether the house prices go up or down depending upon what they are made up of, so owners need to note them when they are looking to sell or even when looking to buy property.
Hirav Shah concludes by saying, “If you are on the lookout for a property, consider these factors before going out hunting for land for sale because they could have a significant impact on the price you are willing to pay. Similarly, if you are looking to sell your property in today’s market, bear these things in mind so that you can get the best value for it.“
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