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The Major Variables Affecting the Price of Homes

by Tina McManus 10/17/2022

Housing prices are constantly changing, which can make both buying and selling a home more complicated. While it’s difficult to predict future changes, it’s important to understand the key factors that affect the housing market and home prices. Here are the five major things that affect housing prices:

Economic Change

The overall health of the economy is a major influence on housing prices. While made up of myriad factors, the “health” of the economy can usually be determined by employment data, manufacturing data and prices of goods. As the economy flourishes, housing prices increase. Likewise, if the economy is suffering, prices often decrease.

Supply & Demand

The fluctuation of supply and demand affects goods and services, and property is no exception. Because physical property is a finite resource, supply and demand can become extremely important in densely populated areas. The differences between a buyer’s and seller’s market is the amount of demand compared to the amount of actual housing inventory.

Mortgage Interest Rates

If the Federal Reserve changes interest rates, mortgage lenders have to adjust accordingly. This results in a different interest rate on your mortgage or loan. Even though the change may be less than a tenth of a percent, it can make a tremendous difference in housing prices. As mortgage rates increase, many would-be homebuyers cannot afford higher priced homes. On the flip side, lower mortgage rates can encourage more buyers to enter the market, which affects pricing through supply and demand.

Location

The location of a home affects its price immensely. There are multiple factors in a location that can affect pricing, such as specific neighborhoods, highways, specific attractions or cultural interest, hospitals and schools. Home prices are higher in areas with rapid growth and lots of commercial activity. Some other location-based variables that can affect the price of a home include crime, healthcare access and proximity to industry.

Understanding the variables at play in the overall economy will help you navigate the housing market with confidence. Keep these factors in mind during your home search or selling process to stay up-to-date on what affects housing prices.

About the Author
Author

Tina McManus

Passionate about nature and the environment—I love the sea—I live happily in Beverly with my husband, Mike, and am owned by two collies. When I'm not doing real estate, you can find me with camera in hand photographing wildlife and birds.

This is a beautiful corner of the country with quick access to the ocean, country, city, and mountains. I'd love to help you find your own little piece of it.