What Really Impacts Housing Prices?

-The "National Bubble" Myth-Understanding…

By David Krebsbach, Investor / Realtor
Keller Williams Realty - Allen

Yes, we've all heard it in the news - on T.V., on the radio, in the newspaper, on the internet, etc. While the real estate market has been very stable for a number of years, we now hear about the dreaded "National Bubble"

Well, before we go too far, let's make this point up front - There is No NATIONAL Bubble. Period.

Yes, it makes dramatic news and catches everyone's attention, but astute buyers, sellers, and investors should be aware of what really drives housing prices (and real estate values in general). We do have certain areas (such as east and west coast, Las Vegas, Phoenix, Florida, etc) that have experienced significant price increases (a Seller's market) and are now experiencing price corrections (heading toward a Buyer's market). But that comes and goes, in cycles. More importantly, what actually drives prices and values!?

1. Imagine the MACRO Level as the red outer circle of the Target. It contains all of the National influences, such as:
   • Inflation rate
   • Interest rates
   • IRS tax laws
2. Think of the METRO Level as the white middle circle. It contains all of the City influences, such as:
   • Population growth
   • Employment growth & stability
   • Household income
3. Picture the MICRO Level as the red inner circle - the bullseye. It contains all of the Neighborhood influences, such as:
   • Age, Density, Development, Permits
   • Social economics, schools
   • Availability of land / housing

The actual Price of real estate and housing can be driven by any or all of these factors. But, when assessing the market, be sure you look at which INFLUENCES are truly affecting Price, and in what Location.

In today's market, the National (MACRO) influences continue to be very stable. The City (METRO) influences vary, depending on where you buy, sell, or invest. The Neighborhood (MICRO) influences are Always changing and it requires hands-on Local knowledge and experience to spot the emerging opportunities.

AIM at the Bullseye!

It might be tempting to think or say the overall health of the industry is weak. But, that is too generalized of a way to look at it. Some might be tempted to say the opposite - that the overall health of the real estate market is wonderfully strong and stable. But, that too is over-simplified.

The REALITY is it depends on all the factors at all levels. Based on these factors, some areas will be good opportunities to Lose money - so don't buy or invest there! Yet, other areas will offer exceptional opportunities. Does it need to be said...!? Yes, BUY or INVEST THERE!

Does this all make sense!?

Real estate is a dynamic, LOCAL market. So buy or invest that way, too - where the local markets are favorable!