Johnny Ch Lok

New Economic Business Behavior Johnny Ch Lok

Economic environment factor influences property price changesOne of the major causes of the Great Recession that followed the financial crisis in the mid-2000s was the housing market crash. It was a direct result of the law of supply and demand. During the lead up to the financial crisis, consumers were enjoying relatively low borrowing rates. Banks began to offer low rates on mortgages, and were encouraged to relax their lending standards. People who weren't otherwise able to afford a home now found themselves able to realize their dreams. These consumers, called subprime borrowers, were able to snag a home with low down payments and low credit scores. During this time, speculative buyers also began entering the market, driving up demand for housing and, at the same time, cutting in to the available supply. All of this, in turn, drove prices up to very lofty levels. The market couldn't keep up, and investors who were merely in the market to make some money-many were buying and flipping homes in a very short period of time-began pulling out of the market. Demand started to drop and, so did prices. The collapse of the real estate market in 2007 created an oversupply of houses and decreasing properties prices. Real estate prices depend on the law of supply and demand. When the demand for property is high but property is scarce, prices skyrocket and it becomes a seller's market. When the number of available properties increases to glut the market, prices typically drop. Supply and demand in real estate aren't easy to balance. Creating more saleable properties takes time, considerable work, and a lot of effort. It's not possible at all in some cases, and even when it is, it might not be possible for supply to increase in time to meet consumer demand. So, salespeoples' house sale experiences can also influence the property developer's house sale number. Understanding this basic economic principle can help consumers decide the best time to buy or sell their properties. Property market Over-Supply Or Under-Supply factorYou can usually expect a drop in prices when there is an over-supply of homes or land in a given area. You can't move the overage to another area to keep prices stable. Scarcity causes prices to rise when there isn't enough land or if there aren't enough homes in a given area. Even if land is available on which to build more homes, the time it takes to construct them cannot meet immediate property needs, so demand will remain constant or rise. Many forces that might have little or no impact on other regions influence local markets and vice versa. Pay attention to the factors that influence your local market. Watch local businesses and make note of upsizing and downsizing trends if you do business in a market that has jobs and many workers relocating there. You'll also want to keep an eye on these issues if you're a homeowner looking to sell in such an area or if you're looking for property to purchase.