The interest rates also affect the price of housing as they form the base rate in an economy. The financial institutions lend money through mortgage in the housing sector and with increasing interest rates the value of the mortgage payment also increases. This increases the overall price of a property or a house. However in a region where there are fixed interest rates, the effect on the housing prices is minimal. Aside from this it is also possible for previous interest rates to have effects on the next years housing prices.
Demographics of the region also amount to the change that takes place in the price of housing in the region. Increase in migration to a region creates demand for housing raising prices. Aside from this increasing number of single person households is also increasing the price of housing in US. Moreover the increasing divorce rate is putting a upward pressure on the demand for more houses resulting in higher prices.
Another factor which tends to affect the prices in the housing sector in the US market as well as in international markets is the element of speculation. This is specifically true for the buy to let market where the basis of the purchase and the sale is made on the speculative future worth of the property. When falling housing prices are expected, people tend to sell their property based investments. Similarly where the speculation is for rising prices, the people tend to buy and invest in properties resulting in pressures on the supply and the demand side of the market.
The economic growth in the region can also affect the prices of housing. Economic growth leads to increasing wages which increase the propensity to buy and save for the people in the economy. As a result they have more money and funds. The desire for better living standards is created resulting in a demand for housing. This then increases the prices of real; estate in the market.
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