The economy has a major impact on the real estate market. When the economy is strong, there is more demand for housing, which drives up prices. Conversely, when the economy is weak, there is less demand for housing, and prices typically drop (think supply & demand). The economy also affects the availability of financing for real estate purchases. When lending standards are tight, it can be difficult to get a mortgage, while loosened standards make it easier to obtain financing. The current state of the economy is thus a major factor to consider when buying or selling a home.
Let’s take a look at a few items to watch in regards to the overall economy which can affect the real estate economy.
The Stock Market
The stock market is often said to be driven by emotion. When the economy is doing well, stocks tend to go up as investors are confident about the future. When the economy is weak, stocks tend to go down as investors become more cautious. Real estate is another area where emotion can play a role. When confidence is high, prices tend to go up as people are willing to pay more for a piece of property. When confidence is low, prices tend to go down as people become more reluctant to make a big purchase. While emotion does play a role in the stock market and real estate, it is not the only factor that drives these markets. Other factors such as interest rates, company earnings, and global events can also have an impact.
Speaking of confidence…
A drop in consumer confidence can have far-reaching effects on the economy. When consumers are confident, they are more likely to spend money, which helps to drive economic growth. Conversely, when confidence is low, people are more likely to save money and postpone major purchases. This can lead to a slowdown in economic activity, as businesses see decreased demand for their products and services. The real estate market is especially vulnerable to changes in consumer confidence. When people feel confident about the economy, they are more likely to buy or sell a home. However, when confidence is low, the real estate market can stagnate, as people are reluctant to make such a large financial investment. A drop in consumer confidence can therefore have a significant impact on the economy and how willing people are to let go of their money in the fashion of spending.
Employment, or lack of.
High unemployment rates can lead to a decrease in demand for housing, which can then lead to a decline in home prices. This, in turn, can cause a decrease in construction activity and a rise in vacancy rates. All of these factors can have a negative impact on the economy as a whole. Therefore, it is important to keep an eye on unemployment rates. If the number of unemployed increases, it can negatively affect the real estate economy.
The price of fuel
We depend on fuel. Whether it’s unleaded gas or diesel fuel, we need it. When fuel prices increase, the cost of transportation also rises. This can lead to inflation as businesses pass on their higher costs to consumers. Additionally, high fuel prices can discourage travel and tourism, which can harm local economies. Real estate values can also be affected by fuel costs. For example, properties near public transit or in walkable neighborhoods may become more desirable as people look for ways to reduce their driving expenses. Ultimately, the price of gas and diesel is a complex issue with far-reaching implications for the economy.
Want to track these items?
If you’re looking for an easy way to track these items, whether they go up or down, feel free to download my Crystal Ball Real Estate Market Indicators which will give you all the links to track along with some other indicators of the economy. Make sure to use the coupon code “economy” to get it for free.
The real estate economy is connected to the overall economy. What happens in one affects the other. That’s why it’s important to watch these items to see the trends in the coming year. They will give you a snapshot of where things are headed and how that may impact your business or investments. Are you ready?
If you’re not ready, but don’t know where to start or have a solid plan in place for your business, you might want to check out my 90 days to Success Coaching Series.
If you’re looking for more ideas to implement into your real estate business to achieve success, be sure to read The Standout Agent, available on Amazon and everywhere books are sold. There’s a reason why it quickly became a #1 seller!
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