What Affects Real Estate Prices?

April 21st, 2010

What affects real estate prices? Perception. The macro-economy. The city. The neighborhood. The street. The curb appeal. The house. The square footage. The bedroom count. The view. The neighbors. The local economy. The condition of the house. Local zoning issues, if any. Access to transportation. Marketing. Government. Tax breaks. Interest rates. Rents. The weather. The landscaping. The Realtors involved. The sellers. The buyers. Emotion. Local income patterns. Local employment. Competition. Supply. Demand. Chocolate chip cookies…and more?

I cringe when I hear someone try and find a small handful of factors as being responsible for the value and direction of real estate. There are so many factors I don’t even think that most people could discuss them all in one conversation. It would take a book, let alone one blog post. It would take a series of books!

So instead of trying to discuss each factor that influences real estate prices, I’d just like to say that we all need to keep in mind that real estate is multifaceted, as is the value of anything. It is local, and its national. It can be higher in Summer and lower in Winter. It can be higher in Winter and lower in Summer. It can be perception. It can be supply versus demand. It can be smelling freshly baked chocolate chip cookies when walking into an open house, that triggers a childhood memory, that makes you want to bid a bit more than you may have under non chocolate chip cookie circumstances. It is everything. It is nothing. It is a business. It is emotion. It is a science. And it is random.

This is the whole point of the “free market”, it usually cannot be explained and pinpointed, it just “is”. When some other economic system tries to make a science of something, that is when the problems begin. The “market” is simply too big to understand and break down into small bits and sound bites.

The bottom line is that sellers try and sell for as much as they can, and buyers try and buy for as little as they can, and things usually work out from there and the final selling price is accurate most of the time. If sellers did not get the price they wanted, then that price was never realistic. If buyers feel they overpaid, they likely paid a market price. There was no specific reason, like “my Realtor was not effective”, or, “we did not have enough open houses”, or, “it rained the whole month we tried to sell”, or, “I should have painted the bedrooms a neutral color.” Things sell for what they are worth, most of the time, period. The marketplace is very effective, most of the time.

There are usually hundreds of forces at work, many unseen, culminating in a selling price for a house. Embrace the chaos, as a buyer or seller, and you will sleep better at night.

Brian Martucci is a loan officer for Capital Bank Mortgage, a division of Capital Bank. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Mortgage or Capital Bank.┬áCapital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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