These 4 Factors Influence the Housing Market

If you find yourself feeling frustrated about the current housing market, you’re definitely not alone. I’ll be honest, the housing market can be super confusing because there are so many moving parts. But when you know a little more about the factors that influence the housing market, you might find that things make a little more sense. So let’s dive in!

Supply and Demand: This is probably one of the biggest factors in the housing market. When there’s a lot of demand, the supply of housing naturally decreases because people are buying more homes. When the supply is low, home prices increase and put us in a seller’s market. On the flip side, when there isn’t much demand, the supply of homes increases and prices will decrease. This is called a buyer’s market.

Low Interest Rates: Right now, we’re experiencing historically low interest rates. Buyers love low interest rates because it means they pay less on their mortgage over time. And those low interest rates have really spurred demand, which has lessened supply and put us in a seller’s market. Interest rates are impacted by the overall health of the economy.

The Economy: When the economy is doing well, interest rates tend to go up because people can afford to buy houses. But when we’re in a rough patch economically, interest rates will decrease so people can more easily make large purchases. For example, during the 2020 recession, interest rates were lowered to help stimulate the economy.

Unemployment: When unemployment is high, the market tends to suffer because you need a job to get a mortgage (in most cases). On the other hand, when unemployment is low, the housing market tends to grow as more people can qualify for a mortgage and enter the market.

As you can see, a lot of different factors influence the housing market—and this is just a few of them!

That’s why working with a real estate agent who really understands the market forces in your area is so important. Agents spend tons of time studying the market and keeping up with the latest developments so they can best advise their clients.