n any given day, people SUPPLY FACTORS
can easily find articles
and news stories describing Limited supply of real estate
an impending bust of the makes it scarce and usually
so-called real estate bubble. pushes home prices up. In
Despite this gloomy prediction, contrast, an oversupply of real
many experts believe that the estate tends to put downward
recent slowdown in housing will pressure on home prices. Despite
be a gradual and modest the current slow down in the real
readjustment rather than sharp estate market, factors that
bust or decline. These experts impact limited supply favor
believe that factors that lead to continued growth in the real
a sharp decline in the real estate market. Some of these
estate market are just not factors include:
present in the current economic
outlook. In fact, a recent study 1. Builders have readjusted
by the Joint Center for growth plans in regions that have
Housing Studies at Harvard an oversupply of new housing.
University noted that Over time, any excess inventory
“despite the current cool-down, is likely to be depleted and
the long-term outlook for housing equilibrium achieved between
is bright.” supply and demand.
The rise and fall of the real 2. The availability of land in
estate market is subject to the certain regions, as well land use
forces of supply and demand, and regulations and associated
these factors point to stable and compliance costs will continue to
positive growth in the real restrict the supply of new homes.
estate segment.
DEMAND FACTORS:
Housing located in regions with 6. Forecasts that the outflows
high demand tend to be more and inflows of the U.S.
expensive than homes in regions population in and out different
with low demand. Factors that regions will not significantly
impact the demand for housing impact the overall U.S. real
suggests a favorable long-term estate housing market.
housing outlook. Some of these
factors include: 7. Relative stability in interest
rates.
1. No current evidence of
significant and across-the-board 8. Continued stability in
job losses; forecasts of long-term home appreciation
relatively low unemployment rates.
rates.
9. Overall, rising rate of wealth
2. Long-term increased demand for across all age groups.
second homes, vacation homes and
senior housing by baby boomers. SUMMARY
3. Long-term increased demand for In summary, strong household
entry-level homes by the children growth, overall rising incomes
of baby boomers. and wealth, and a stable economy
all bode well for continued
4. Long-term increased demand for long-term growth in the real
entry-level homes by immigrants. estate market. While the overall
housing outlook is favorable,
5. Long-term increased demand for affordability will continue to be
entry-level homes by a challenge, as wages, especially
second-generation Americans. in the lower income levels, have
not kept up with housing costs.
About the Author:
San Diego Homes
Mira Mesa Homes
Pacific Beach
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Real Estate Advisor
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