Real Estate 4 factors over which you have no control that will affect your home’s value. Renovations, a new pool, fancy landscape and a desirable location may increase the value of your home to some extent. But here are four Economic factors that will have a leading impact on the value of your house. 1) Housing Starts The housing market has two major components: housing starts and home sales. Housing starts equals the number of new residential projects beginning in any given months. In a booming Economy, people are eager to buy a new home. In a weaker Economy, the same people tend to hold off on new purchases. Housing starts are an integral indication of how our Economy is doing. Other markets affected by housing starts are the money lending business (mortgages), property sales, raw materials and employment, to name a few. 2) New Households When prevalent households are being formed, demand for new housing increases, driving home prices up. When housing starts are being created at a rapid-rate for an extended period of time, home supplies may exceed the number of families looking for new homes, driving home prices down or flat. When more households are conceived, demand for housing go up again and so forth. 3) Money Supply The money supply is critical to a healthy Economy. When the lending valves are tight, making it harder to qualify for a mortgage, housing starts and home sales decelerate, unemployment go up, less people can afford to buy homes, new vehicles etc.. The money cycle dwindles. When the lending valves open again, housing starts and home sales increases (2003-2007). More people can qualify for a mortgage (many who shouldn’t) driving home prices up until the inevitable occurs; market adjustment, correction or crash. Housing construction and home sales should ideally align with economic activities, but it’s not always the case. 4) Interest Rates Interest rates have a major impact on the Real Estate markets. Changes in interest rates can greatly prohibit a person’s ability to afford a mortgage payment. When interest rates drops, debt servicing becomes affordable, which creates a higher demand for Real Estate, which pushes prices up. Conversely, as interest rates rises, debt servicing extortionate homeowners, thus lowering demand and prices of real estate. On the other hand, it is important to pinpoint that market volatility in Real Estate is more stable than other investments for the following reasons: Real Estate is not liquid. Selling a home can take several weeks or months. Appraisal values are based upon previous sales. In some instances, several months delayed. Financing a new purchase can be problematic if the property sale price is greatly above the bank’s appraisal. Homeowners may decide to hold off listing their property if similar homes in surrounding areas sold for a higher price.
Posted on: Wed, 14 Aug 2013 03:23:00 +0000
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