Market Factors That Affect Home Value

Market Evaluation

Knowing what your home is worth is important information to have if you are thinking of selling your home. A market evaluation will help a home owner make the right decision when it comes to selling or holding onto a home.

One of the first things Reef Point Realty will ask is, why are you selling your house? We will also explore any time constraints you may have, your financial situation and any future plans. It’s all part of getting to know you so the sale will be handled to your complete satisfaction.

Arriving at an accurate estimate of value for your home is our number one priority. It involves analyzing your home and comparing it to other, similar houses for sale or recently sold in the neighborhood. It also includes a broad market survey, using sales, population, employment, and housing inventory statistics available.  To effectively sell your home Reef Point Realty will ensure the price you set reflects the true value of your home under current market conditions.

You may be asking yourself what determines the market. The local market is controlled by the basic factors: How many people are buying and how many homes are available? The current market is considered a buyer’s market because the number of homes available to sell exceeds the number of people available to buy.

Demand for housing

The demand housing is sensitive to changes in market demand and supply. Demand conditions for housing influence people’s choice to buy or not to buy a home. Some of the most important conditions of demand are listed below.

Incomes increase

Home ownership is a normal good for most people. As average income rises, the total demand for housing will increase, also the demand for more expensive properties increases as people look to buy larger and nice homes.

Income effects affordability.  Affordability is the ratio of house prices to incomes. If affordability improves demand should rise, but, it depends on many other factors. Currently housing affordability is substantially improving because prices are falling but people don’t want to or can’t buy.

Availability of mortgages

Most people are dependent on getting a large mortgage up to 95% of house value. If mortgages become less available then demand will fall. After the credit crunch availability of cheap 95% mortgages has declined. Banks are demanding bigger deposits that many first time buyers don’t have therefore demand for housing has fallen. As a result many buyers have started using VA (0% down payment) and FHA  ( 3.5% down payment)  loans to purchase homes.

Confidence

Buyer confidence is very important in the economy. If expectations for the future performance of the economy look negative and people tend to worry their own financial circumstances, and as a result they will delay buying a home until the economy improves. Equally when the economy is doing very well, confidence bolsters the number of home buyers. The bottom line is people don’t like to buy when house prices are falling because they will be able to buy it later for cheaper.

Employment

Because financing a house purchase involves making a long-term loan commitment, changes in unemployment take a toll on housing demand. For example in areas when unemployment remains persistently above the national average, average incomes are likely to be lower and confidence among buyers will be negatively affected

Interest rates

These determine the cost of paying a variable mortgage. Lower rates make interest payments more affordable. The current interest rates are at the lowest point in the last 55 year.

Changes to the system of housing taxes and subsidies –

Government policies affect the housing market in many ways ranging from tax benefits and tax credits. Recently the Federal government gave a tax credit to anyone who purchased a new home in an attempt to jumpstart the economy. The state of California also provided a tax credit for new home buyers. These benefits were thought to be one reason that average home prices and the number of home sales rose from 2009 through 2010