The real estate market is a crucial factor of production that influences business productivity, just as labor and capital do. The efficient use of real estate can boost productivity, increase revenue and help your company grow. However, the real estate market is complex and volatile. To gain a competitive edge, you must have a deep understanding of the market’s dynamics.
The primary factors influencing the real estate market are consumer demand and economic growth. As the economy grows, so does the number of consumers, resulting in increased demand for residential and commercial real estate. Similarly, when the economy slows, consumer demand declines and the market adjusts.
Real estate is also immobile, which creates unique equilibrating mechanisms that differ from other goods markets. For example, a house is located on a specific lot and cannot be moved to another location (unless it’s a mobile home). This geographic fixity is why consumers must come to the property rather than the property going to the consumer—and why the market is so sensitive to changes in local demographics.
A deep analysis of the real estate market involves analyzing critical trends and data that impact sales, prices and costs. In New York, for instance, the median price of a home is $400,000 – significantly higher than other parts of the country. This reflects a variety of factors, including local housing market conditions, regulations and laws that affect the industry. Entities such as Freddie Mac and the National Association of Realtors release data on national real estate trends that can offer insight into local markets, but these reports must be scrutinized carefully for their relevance to individual neighborhoods.
