The real estate market is a group of local and regional markets that include residential, commercial, and industrial properties. The demand for each type of property is determined by its location, use, and condition. Real estate prices are driven by economic factors such as supply and demand, taxes, and interest rates. In addition, the market is affected by social trends like lifestyle choices and environmental issues.
Despite these many influences, the real estate market is unique in that it is highly illiquid, and buying or selling a home can take significant time and effort. As a result, it is important for investors to understand the different factors that can affect real estate prices and trends.
Demographics
Major demographic shifts can significantly influence real estate markets for years to come. The retirement of the baby boomers, for example, will have a major impact on both real estate demand and prices for decades to come. Similarly, changes in family size and income can also have a direct effect on the type of property in demand and its price.
Taxes
Government incentives can have a dramatic effect on the real estate market, especially during a recession. For example, in 2009 the US government introduced a first-time homebuyer’s tax credit to jump-start home sales, and as a result, demand for new homes increased dramatically. Therefore, it is important to be aware of current government incentives and how they may influence demand for your specific property.
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