Economic Forces

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Causes of value fluctuations in real estate caused by economic forces include:

 

Income levels
Employment
Construction costs
Availability of credit
Interest rates`

 

Economic forces refer to forces of the economy.  Some examples follow:

 

Income levels.  As income levels rise in an area, the demand for more expensive houses will result.

 

Employment.  High unemployment will reduce the demand for houses.  If a large employer closes, demand for real estate will go down.  If a new large employer opens in the area, demand for housing will increase.

 

Construction costs.  If the cost of labor and/or materials increase to the point that they affect the cost of construction, the cost of housing will increase.  Government regulations may cause the cost of construction to increase.  Recently Cherokee County imposed an "impact fee" on developers increasing the cost of construction in the county.

 

Availability of credit.  When credit is easy to obtain, and active market is the result and the demand for housing increases.  When credit is difficult to obtain and lenders are choosy, may potential buyers are excluded from the market.

 

Interest rates.  When interest rates go down, demand goes up.  When interest rates go up, demand goes down.

 

Related Topics:

 

Forces that Affect Value

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