Key Factors that Drive the Real Estate Market

What Are the Key Factors that Drive the Real Estate Market?

This week we continue our series on the key factors and drivers of the real estate market.  Whether sold via a traditional listing or at a real estate auction, these are important factors to keep in mind when buying and selling.

There are multiple factors that drive the real estate market. Despite all the attention paid to national trends and mortgage interest rates, real estate values tend to be affected by local conditions more than anything else. Everyone has heard the old adage that real estate is all about location, location, location. There has never been a truer saying. Therefore, there are some things you should consider whether you are buying a home or an investment property.

Every owner would love to sell their house at the price that they think it is worth. The fact remains, a home’s market value is ultimately determined by what a buyer is willing to pay. It all comes down to the simple economic law of supply and demand. If the housing supply is greater than the demand, home values will drop. However, if the demand is greater than the supply, the values will go up. Does that make sense to you?

Understanding Real Estate Values

Moreover, the price you may have paid for your house last year, 3 years ago, 5 or 10 years ago has absolutely nothing to do with the true market value today. Real estate prices fluctuate every year. Usually, the price will go up, but sometimes they do fall. This was a lesson that some learned the hard way back when the housing boom went bust. While real estate prices have consistently gone up over the long-term, it is never in a straight line.

All that said, all real estate is local. Values appreciate differently from town to town, neighborhood to neighborhood, and even street to street. Furthermore, while the condition of your house does impact the market value, the cost of repairs and upgrades do not always coincide with home prices. It may be difficult to grasp, but it is simply that cost does not always translate to value. Ultimately, there are factors that are outside a property owner’s control.

Local Factors that Influence Real Estate Value

  1. Taxes – When states and cities have high income and/or property taxes, this results in less money for real estate. That said, rental properties can do well, directly caused by housing being unaffordable.
  2. School Quality – The quality of local schools can place an area at an advantage or disadvantage. Things like test scores, graduation rates, the percentage going on to college, student to teacher ratios, and other factors all play a role.
  3. Quality of Services – Much as with schools, the quality of local services can also impact the real estate market. These services include police and fire departments, parks and recreation, and hospitals and healthcare.
  4. Labor Issues – Employment opportunities and jobless rates can positively or negatively influence real estate prices. People tend to move where there are jobs. So, if a company moves into an area (or decides not to) based on taxes, regulations or the prevalence of unions, it can change the demand for housing.
  5. Walkability – This is a measure of how friendly an area is to walking. Walkability is determined by the existence or inadequacy of things like sidewalks, pathways, and traffic, and zoning, plus access to public transportation, shopping, entertainment, and jobs.
  6. Climate and Weather – The climate and weather in any given area can have a direct impact on values. For example, Florida became an attractive place to retire because of its tropical climate and easy access to the coastline.

This article provided a brief insight into factors that drive the real estate market. But, there are many more moving parts that do come into play. Nevertheless, understanding the factors that impact real estate values is important for both homeowners and investors. It is worth observing these conditions and the influence they may play on your property’s value.

Whether you’re buying your home with an agent through a traditional listing or purchasing from an agent/auctioneer at a real estate auction; these factors are always important in the value of the real estate.

For help finding an investment property, acreage or home for your family in Ohio, West Virginia and Western Pennsylvania, please contact us. Ask us about traditional listings and real estate auctions.

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