Demand Factors

Several specific variables drive the demand for real estate. First is the price of real estate; obviously, as prices rise, fewer people can afford to buy. Population and household composition are also critical; an increase in population or a trend toward smaller households (more single people living alone) increases the need for housing units. Income of consumers dictates purchasing power; when wages rise, more people enter the market. The availability of mortgage credit is arguably the most immediate lever; when interest rates are low and loans are easy to get, demand surges. finally, consumer tastes change over time, such as a shift in preference from suburban McMansions to urban condos, altering where demand is focused.