There are many things that could affect the real estate market. The main factors that forecast the trend in the real estate market are the economy, the population growth, the rates of interest for loans, and the demographics. In fact, according to a study conducted in 2014, there will be an increase of demand for housing over the next few years. The reason for the increase in housing demands is the surge of population growth. Population growth depends on two basic components, natural and non-natural population growth. Natural population growth is rate of live births that occur in the area. Non-natural population growth refers to the migration of people in a place affecting the demand and supply for food, housing or other needs in that environment.
Demographics are defined as the study of a population’s characteristic. Age, sex, race, education level, economic status and other factors used by the government and private sectors for many purposes, such as forecasting and identifying the buying capabilities of a population on a regional or national basis.
Real estate researchers have forecasted the surge of population growth. If the data from the research proves to be true, there are four generations in today’s market on the lookout for housing and two generations play a very significant role in the development of housing demands. The economic capabilities of today’s population tend to favour more on rental rather than homeownership. The recession has greatly impacted the demand for owning a property and the demographics show that many people are opting to rent rather than own. Even property owners who had initially planned to sell their homes are renting them out instead because rental rates and high tax rates are lower for rental investors.
GEOGRAPHIC REGION AND JOB OPPORTUNITES
Since the current market is now recovering from the recession that lasted from 2008- 2011, unemployment rates are going down. A lot of Americans now find themselves moving or migrating to areas where work is available. This migration makes a lot of people choose to be practical by renting rather than buying a house. There are certain cities across the country like Los Angeles and New York where rental rates are surging due to the demand for rental properties. Even industrialized parts of these cities are transforming into residential areas to accommodate the ever-growing number of young people who want to live there.
Age is another demographic variable the greatly affects the rise in demand for rentals. Young people ranging from 18-35 years old are the largest percentage of renters. Traditionally, these young people would have become first time homebuyers as they advance in their careers. They are predicated to choose renting versus owning due to changes that happened in the economy (recession, job loss, low-income). Another reason young adults find renting a more attractive choice is that they don’t feel the need to be burdened with a mortgage loan. Most young adults believe could not afford to own a house and face the financial obligation that it entails.
Demographics cannot be ignored because it greatly affects, if not, dictates the fate of business investments. The basic rule of supply and demand tells us if there is a high demand for a certain product, the more valuable the product becomes. If there is a high demand for rentals in an area, the higher the rental rates become.