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Factors Affecting the Housing Market

E3 Housing Solutions
Factors Affecting the Housing Market

The housing market is affected by plenty of different factors. With the challenge of making Affordable Housing Solutions accessible to everyone, it is important to understand the factors that actually dictate the course of direction in which the market moves.

Learning about these factors and studying them can better help firms and authorities to come up with effective counters to ensure that offering affordable housing solutions to every citizen becomes a reality.

Factors Affecting the Housing Market

Employment Rate

Unemployment plays a key role in affecting the housing market. If unemployment rates are increasing, the chances of people being able to afford a house decrease significantly. This fear of unemployment can also discourage people from entering the housing market for making a purchase.

Economy Growth

Income dictates the demand for housing projects in a market. If the economic growth is on the rise, the incomes will increase, further implying that people will be able to spend more on houses, which can further increase the demand and push up prices for the same.

In many terms, the demand for housing is often regarded as income elastic, meaning the rise in income leads to a bigger portion of income being spent on affordable housing solutions. In a similar fashion, if the period of recession comes in, the decrease in income will imply that people can't afford to buy and people who have lost their jobs during that period can fall behind on mortgage payments.

Interest Rates

Interest rates can severely affect the monthly cost of mortgage payments. The high-interest rate can increase the cost of mortgage payments which can lower the demand for markets in buying a house.

High-interest rates make renting more attractive in comparison to buying.


Shortage in supplies can naturally lead to an increase in prices. On the other hand, excess supply could lead to a fall in prices. In case you don't understand, the supply of houses depends on the existing stock and the building of new houses. The supply can be quite inelastic since getting planning permission and housing building can be a pretty time-consuming task.

Customer Confidence

Confidence is key for determining no matter if people want to take a risk by taking out a mortgage. In a general sense, the expectation of the housing market is fairly important. If people are in constant fear that house prices could fall, people will feel hesitant before buying a house.

Mortgage Availability

A couple of decades ago, plenty of banks were keen on offering mortgages. Not only that but they also allowed people to borrow large income multiples. Back in the day, banks required very low deposits.

This increase led to more people being able to afford a house. But ever since 2007, buildings and banks have struggled to raise funds for lending the same in the money markets.


This severely affects the concept of affordable housing solutions. If house prices increase in relevance to incomes, there won't be many people who could afford to buy a house. There have been years when the interest rates became unreasonably high, making affordable housing solutions a distant dream for people, but in the coming years, there was a sharp fall in the prices of housing.

Geographical Factors

The majority of housing markets depend on geographical location. In case the national housing prices might be going down, there will still be areas where the prices are going up. The areas in demand can become the exception to market trends since the demand is high, and the supply is limited.

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