The real estate market encompasses all property that comprises land and the buildings on it. It includes both residential and commercial properties, such as apartment complexes, malls, office buildings and single-family homes. Real estate is a long-term investment that can provide substantial returns. Investors in real estate can purchase individual properties or invest in a variety of REITs, or real-estate-investment trusts.
Local and general economic forces affect the demand for real estate and the supply of property available for sale. When demand exceeds supply, prices rise. When the supply of available properties is higher than the demand for them, prices fall. In general, the local economy has a greater impact on real estate trends than the national economy.
Demographic trends, such as population shifts, are a major factor that can influence housing market trends for decades. For example, the retirement of baby boomers will likely have an effect on home prices and demand for vacation properties in popular destinations.
Interest rates can have a significant impact on the demand for real estate and its prices. When interest rates are low, more buyers can afford to buy property and demand increases, driving up prices. Conversely, when interest rates are high, less people can afford to buy property and demand decreases.
Local government regulations and policies can also affect real estate markets. For instance, when a city offers tax credits or deductions to attract new homeowners, demand for real estate may increase.
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