6 Reasons Why Prices Of Homes Rise and Fall

In this post we talk about how to determine the present and future value of your home, what are the factors controlling the prices of homes and how to spot a future trend of prices for homes in your area.

If you are contemplating buying a home, you might want to know whether the prices of homes are going to increase or decrease in the future. This might affect a decision to a certain degree where you might want to find the best deal possible. People want to buy a home and get the best price possible.

So if the housing prices are likely to decline in the future, a person might decide to wait for some time before making the purchase. Similarly, if the rising prices are likely to increase, you might want to purchase a home right now before the home that you want becomes unaffordable.

The truth is that the prices of homes and the way they fluctuate depends upon several factors. The housing industry specifically, as compared to any other kind of a market, experiences more ups and downs. Similarly, it is just as difficult to predict the exact trend of housing prices in your particular area or community.

By the end of the day, the housing prices depend upon several factors like the economic vitality, financial health and the demand and supply of housing in a particular idiot. It is not uncommon to find that even giving an economy downturn, in a certain state or area where the demand of housing is high, the prices continue to increase whereas in other sections they are on a downfall.

why do prices of home change

The important thing to consider here is that when you purchase a home, you are likely to own the property for several more years. During this time of ownership, you are likely to see several downwards and upward trends as far as the prices of homes are concerned. Therefore, you should not get too hung up about the future trend of home prices and make the decision based on your present ability to buy your dream home.

Your loan affordability and your ability to pay off the home in the future is probably the most important factor. Predicting what might happen with real estate prices in a particular neighborhood, town or region over the next two, three or more years is difficult.

If you decide to wait for the home prices to decrease further than what they are for no other reason than the fact that you can expect to save some more money, you might be waiting for a long time, which is something that has happened to more than a few people. If you can afford the house right now and comfortably pay it off in the future, you must give it serious consideration rather than get too hung up about whether prices are headed in the future.

Conversely, if you only expect to hold on to the home for a short amount of time let’s say 3 to 5 years, the price that you purchase it for makes a bigger difference. The shorter the time period that you expect to hold on to your home number the more important it is to be careful about when you buy. This is to ensure that there is no quick fluctuation in the near future that causes you to lose money when it is time for you to sell the home and move somewhere else.

Also, buying a home a home and selling when there is not enough time in between the two to let the equity in the home grow, will result in a loss for the home owner. This is because of the cost of selling the home such as evaluation, appraisal, documentation and many other fees that are similar in nature to those you have to pay when buying a home.

However, even if you expect to stay in the home for a long time, understanding some of the factors that cause the home prices to rise and fall is a good idea. You’ll be able to maximize the amount of money you save and get a good buy that will be worth your while. In this section we will talk about the few various factors that drive the real estate market prices.

Factors that drive real estate market prices.

Purchasing a home might be the biggest liability that you ever take, and for most people it is also the biggest investment.

The money that you invest in buying a home has the potential to be here biggest investment with the most fruitful returns in your lifetime. When you look at the factors that drive the prices of real estate, you may want to look at the whole aspect from an investment standpoint.

People buy properties for different reason, some as their own to live and others as investment properties to sell in the future or to rent in the meanwhile. These are some of the factors that affect the prices of homes in a community, town, region or state.

What you should know right now is that what is good from an investment point of view when buying a home or a property is very likely a dis-advantage for a first time home buyer looking at a long term homeownership. For example, if the prices for real estate are fast escalating in your area, it is great news for investment property buyers.

However, if you are a first time home buyer, you will be troubled by the constantly rising home prices, making the houses more unaffordable every year and making it equally difficult to accumulate that downpayment. We speak for a ‘first time’ home owner, because existing home owners usually sell their current properties before buying a new one.

Home prices are like corks floating on water. They mostly go up and down at the same time. So while the cost of buying a new home may be high, the existing homeowner will not feel the pinch so much because he will get a similar high price when he sells his existing property.

The factors that control home prices mainly are:

  • Employment ratio and creation jobs and growth opportunities.
  • Demand and supply ratio of the number of homes available and the number of people wanting to buy.
  • Number of homes available for sale.
  • Cost of renting as compared to cost of homeownership.
  • Potential for future housing development.
  • Interest rate on home loans.

We will discuss and explain all of these in the next few posts.