You no doubt already realize that your location, the condition of your home, the quality of the local school systems, and local job availability can all affect your home’s value. But what else drives real estate prices, on a national level? Several factors can influence what the market does, for better or worse.
Demographics – age, gender, race, income, and population growth can all affect what happens with the overall all real estate market. Baby boomers, for example, may be looking for smaller homes (without small children
around any longer), or vacation properties en masse. And as families trend toward having fewer children, larger numbers may be seeking different layouts with more living space and fewer bedrooms.
Government policies – the implementation of tax credits and deductions, as well as subsidies, can have a temporary effect on the real estate climate, increasing demand for the years they are in effect.
Interest rates – when interest rates are up, buyers are more cautious about house hunting. On the other hand, during times of lower interest rates, more buyers are in the market, which in turn drives up home prices due to increased demand.
The economy – the health of the real estate market tends to go in cycles, just like the economy. An economic downturn nearly always spells a slowdown in home sales, thus prices drop in order to entice buyers.