News / Finance

What Determines Home Prices?

There are so many articles in the newspapers and media regarding this topic. The infamous question: “Is the bubble going to burst?” What bothers me is that a majority of the articles I read do not address the real reasons and combined factors of what determines property values to increase/decrease.

Fred Solomon, radio show host and author of Put Your Money Where Your House Is, reports that there are three major market indicators in real estate that every homeowner should know as to what exactly determines home prices.  They are unemployment factors, population growth and people's income levels.  These market indicators will determine whether you should buy a home (or the best timing to sell) in any part of the country.   Knowing what your home is worth is important information to have if you are thinking of selling your home. 

These are the THREE Economic Indicators:
1. Unemployment: — If you know what the unemployment figures are in the city, county, and state in which you are buying in and then, compare those figures to the National average, that gives you a real good idea if you should invest in that area or not.  
•    What is the trend in the area?
•    Are more people getting jobs or losing jobs, overall?  Basically, if people have jobs, there are going to be renters.
•    Renters mean you can always rent out the home and if some financial hardship should ever come your way, you could rent an apartment yourself.  Low Employment in your area means that you could rent out the Apartment pretty quickly because when people have jobs what do they do?  Spend money!  They buy houses, rent apartments, you get the idea!  More people in your area getting promotions, means that more people in your area might buy homes. 

2. Population Growth — Did you know in the last 17 years, Nevada has had the highest percentage growth, more than any other state?  What is the number one reason people move to an area?  Job Growth!  *Rental prices are going up, because of continued population growth.  More population growth means that more people will rent and purchase homes even with the foreclosure problem we are seeing here in California.  Once these houses get foreclosed on, these people will have to live somewhere.  These people will have to live somewhere, which means they will most likely have to rent somewhere.  As long as the population continues to grow like it has in Southern California and Nevada, rents will have to increase because of that.

3. Income Levels — If people’s incomes are not going up and home prices are, the bubble will eventually have to burst.  Home affordability went from 25% to 11% since June 2003.  This means that 14% more of California’s residents can no longer afford to buy a median price home in this state.  If rates stay low, again, we’ll be okay. If home prices continue to go up and people’s incomes are not, well, that means that we will have even a bigger problem with affordability. That will obviously be the driving force of lower housing prices.

For more information subject of this release:
Fred or Lisa Solomon
949-251-8733
http://www.freemoneyhour.com