Market conditions

What are market conditions?

Market conditions are the factors that influence the housing market in a particular area, such as cost of living, demographics, supply and demand, mortgage rates and more.

Deeper definition

Market conditions affect everything from what types of property people want to buy to how much a typical house costs. The overall status of the economy, such as the unemployment rate and the cost of goods and services, has a major influence on the real estate market. For example, if unemployment is high and jobs are hard to come by, there will be fewer people taking out mortgages. If people are paying more for groceries, health care and other necessities, they might not be able to afford a new home.

Interest rates also affect market conditions. When they rise, obtaining any type of loan, including a mortgage, is more expensive. Because of this, fewer people may be in the market for new homes. Lower demand then drives down housing prices.

The demographics of a nation influence real estate. For example, an older population might be looking to buy vacation homes for retirement. Or, because they’re no longer working full time and their children have moved out, they may want smaller homes, creating less demand for larger properties.

The demographics of a specific area are another part of market conditions. If a neighborhood or city appeals primarily to young families with children, this will influence what types of homes they’re looking for and how much they can pay.

Market conditions example

Even when folks feel ready to buy a home, market conditions, which are factors beyond their control, often influence when, how and even if they buy a property. For example, when unemployment is low and employers are adding new jobs, consumers are more confident in their ability to stay employed and maintain their mortgage payments.

If interest rates are exceptionally low, the demand for houses surges, making it difficult for buyers to find homes they want at prices they can afford.

Ready to buy a home? Here are six things you should do first.

Other Real Estate Terms

Net effective rent

Net effective rent is the average amount of rent paid per month. Bankrate explains.

Gross rent

Gross rent is the actual amount you pay for rent each month. Bankrate explains.

Fixture

Fixture is a common real estate term it pays to understand. Bankrate explains it.

Installment contract

Installment contract is a common term that every consumer should know. Bankrate explains it.

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