Successful real estate investors keep themselves aware of the economic indicators that have the most influence on their markets.  As we’ve discussed the last couple of weeks here on the blog, real estate comes down to the economic fundamentals that influence people’s lives and choices.  Here are the 5 most important real estate market factors to watch.

1)      Demographics create the underlying need for housing and commercial property in your area of interest.  How many people are in the age range and life status with the most need for new housing and job space?  Not just population numbers, but factors such as age, gender, marital and family status drive the type of property that is truly needed  – and the type that will sit un-sold.

2)      Interest rates determine how easily, and even if, you and/or your prospective buyers in various income and asset profiles can qualify for mortgage loans.  Interest rates affect market values as well, as the more of a buyer’s income must go to interest, the less is available for mortgage principal.

3)      The economy.A stable economy not only provides income for home buying, it gives your buyers confidence in their future.  An economy that is losing jobs undermines prospective buyers.  From broad economic statistics to specific business earnings results, these factors determine what the real estate market will look like at any given moment. Also, what is going on in your local economy…is there a net migration of people to your area, or is there a mass exodus.

4)      Big-picture real estate statistics, including the number of properties on the market, time on the market and average sale price have a significant effect on values and negotiating positions.  Watch for changes that may indicate important market shifts.

5)      Government incentives and policiescan be critically important to the real estate market.  Keep your eye on foreclosure relief programs, tax deductions and credits, zoning regulations, and other legislation that might affect how the market performs.

The forces driving real estate values and markets can be complex, but identifying the 5 principal factors will help you stay informed.

Which economic factor do you consider to be the primary influence on your local real estate market?

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