From the perspective of investment, real estate is one the most attractive sectors for entrepreneurs. Residential and commercial properties are significant sources of income and revenue for millions across the country. Coupled with generating steady cash flows, the sector offers a number of tax benefits to investors.
However, investing in real estate can be risky. Investors must exhibit patience, commitment and a thorough understanding of the factors that influence the housing market to attain profits in the long run.
In this blog, Long Island Insurance Executive, Gregg S. Marcus, takes a look at the most important factors that affect the real estate industry.
Changes in interest rates affect prices of properties. To put it briefly, high interest rates lead to an increase in the cost of mortgage. As a result, this pushes down the demand and prices of properties. Therefore, it’s imperative to research interest rates before buying a residential property on mortgage.
On the other hand, if you’re considering investing in a real estate investment trust, declining interest rates will make the REIT returns more attractive. Decline in the interest rate increases the value of the investment trust.
Another major determinant affecting real estate prices is overall state of the economy. Before investing in real estate, investors analyze major economic indicators, including but not limited to, gross domestic product, employment data, inflation, manufacturing, and more.
An economic downturn adversely affects the real estate industry. It generally restricts the lending capacity of banks and other financial institutions and impedes growth in real estate.
Government legislation and regulations can affect the demand and supply of properties. Broadly speaking, the real estate industry benefits from subsidies, tax credits and subsidies.
In order to increase home sales in a slow economy, the government offered tax credit to first-time homeowners in 2009. As per the National Association of Realtors data, this incentive led to 900,000 home buyers to buy homes.
Last, but not least, demographics (age, gender, race, income, population growth, etc.) can influence properties demand and prices.
Demographic shifts reflect the demand for different types of properties and how they are priced.
These are the major factors affecting the real estate market. If you’re interested in reading more about real estate, insurance, or any other business news, contact Gregg S. Marcus’.
Gregg S. Marcus is a humanitarian, philanthropist and insurance executive who offers guidance in several states, including Georgia, Texas, North Carolina. He handles an array of insurance policies, including personal, business, property and casualty and more.