Homebuyers: don’t be fooled by alarmist headlines

Everest has the full scoop on real estate market pricing

Ever wonder what fuels the real estate market?

You know, why prices are soaring one minute, and nosediving the next? Or why inventory goes from nonexistent to half the neighborhood for sale? It’s a crazy real estate world out there, but don’t worry—we’ve got you covered.

Professor Everest, here! Happy to be your guide…

Welcome to Housing Market 101


If you follow the news or listen to watercooler chat, you likely know the real estate market is experiencing a bit of drama these days. Huge price hikes, low inventory, and heated competition have been hallmarks of the industry since 2020. With mortgage rates beginning to rise, people are curious as to how things will look a few months from now.

Sure, we could talk about future market predictions. We could also look at regional trends and other temporary factors. But there’s nothing as accurate as the old-school definition of ‘what affects real estate prices.’ By sticking to the textbook, it’s easier for homebuyers to maintain realistic expectations and make smart choices with their investment.

Let’s start with the basics.

What factors drive the real estate market? 

  1. Demographics (population stats)
  2. Interest Rates (mortgage matters)  
  3. The Economy (national health)
  4. Goverment Policies (taxes and subsidies)
For detailed market breakdown, visit Investopedia
Four at the core?

When considering listing price, factors such as location, neighborhood comps, the age and condition of a home, recent upgrades, and local influences all apply. But if you boil things down, you’re left with four major influences affecting the housing market at any given time: demographics, interest rates, the economy, and government policies.  

These key components help explain why real estate is always in flux. They also highlight the importance of having an experienced mortgage broker and real estate agent at your side.
Ready to break this thing down? Don’t worry, there won’t be a pop quiz.

4 Key Factors Influencing the Housing Market

1. Demographics

According to Investopedia, “Demographics are the data that describes the composition of the population, such as age, race, gender, income, migration patterns, and population growth.”

Homebuyers often forget about this factor, as it’s not as easy to track as something like neighborhood comps. Real estate pricing can be shaped drastically by shifts in a region’s demographics. For instance, an influx of older millennials might drive demand for larger single-family homes. Likewise, experts say baby boomers’ transition to retirement has had a massive impact on senior markets in states like Florida, Georgia, and the Carolinas.

Fun Fact: As of 2022, millennials (aged 23 to 41) make up the largest share of homebuyers at 43%.

2. Interest Rates

If you’re planning on purchasing a home with a mortgage, interest rates are a significant consideration. This factor not only determines the final cost of a property but also affects the number of listings available in your price range. Also, when interest rates rise sharply like we’re seeing today, families may be priced out of a particular market—meaning, homes they could easily afford just months before are suddenly out of reach. This aspect of the real estate market can be frustrating, but it’s important to be realistic.

“Changes in interest rates can greatly influence a person’s ability to purchase a residential property,” says Investopedia. “That is because the lower interest rates go, the lower the cost to obtain a mortgage to buy a house will be, which creates a higher demand for real estate which again pushes prices up.”

Fun Fact: Working with a good mortgage broker can help you save on origination, appraisal, and application fees.

3. The Economy

Food. Gas. Utilities. Cars. Airline fares. When prices go up, we all feel the sting! Like every other aspect of life, the economy dictates much of what goes on in real estate. Factors like inflation, consumer spending, GDP, manufacturing activity, and employment rates have a powerful influence over the housing market. Luckily, the economy operates cyclically, just like real estate. So, when things get bad, look on the bright side—things will eventually get better.

“Broadly speaking, when the economy is sluggish, so is real estate,” says Investopedia. “However, the cyclicality of the economy can have varying effects on different types of real estate. Although you should be aware of the part of the cycle the economy is in, you should also be cognizant of the real estate property’s sensitivity to the economic cycle.”

Fun Fact: Real estate affects the economy too! Experts say rising home prices encourage consumer spending and overall economic growth.

4. Government Policies

Our leaders in Washington also pull the strings! Under a given administration, legislators may offer government incentives in the form of tax credits, deductions, or subsidies. These monetary benefits help boost real estate demand for as long as they are in place—which could be for years. When these incentives are particularly desirable, markets may see limited supply.

Per Investopedia, “For example, in 2009, the U.S. government introduced a first-time homebuyer’s tax credit in an attempt to jump-start home sales in a sluggish economy.”

Fun Fact: Roughly 2.3 million people took advantage of the 2009 tax incentive.

Everest says: Don’t forget to factor in your fantastic broker!