The housing market is a volatile market. However, the housing price keeps on increasing most of the time. There are several reasons why the housing price is affected. Here we are going to discuss some of the reasons.
Decrease in supply
Many people now prefer living in a safe and secured neighborhood. They also prefer luxuries. There are not many properties available in this segment. So, the housing price increases due to a shortage of supply.
Increase in employment
Towns and cities are developing and thus creating more employment opportunities. More people are shifting to cities with more job opportunities. So, the housing prices of these cities keep on increasing.
The housing price gets affected due to inflation. Housing prices tend to increase in the high inflationary environment. But when the interest rate increases, the housing price falls even in a high inflationary environment. When the interest rate decreases, the housing price increases.
Strict credit policy
When there is an economic downturn, people lose employment. The homeowners struggle to pay their mortgage fees. The banks make the credit policy stricter so that only people with sound credit history can buy a house. As not many people have a strong credit history at the time of economic downturn, the price of the house tends to decrease.
Before purchasing a house, you should look at the housing price trends of previous years. You should buy a house at the time when the price is low. Otherwise, you won’t be able to make much profit in case you want to sell it in future.