If you know anything about the housing market, you will know that supply and demand has a huge impact. When there is a high demand for properties in a specific area and not enough to go around, the price of property rises. This is because people are willing to pay more for something that is harder to come by. When there is no demand for properties in a specific area and too many to go around, the price of property falls. This is because people have more options and can therefore get more for their money by shopping around. It doesn’t matter whether we are looking at renting or buying, this is always the case. When homes are more affordable, the housing market is affected.
How Much is the Housing Market Affected by Home Affordability?
There are a lot of ups and downs in the housing market, it’s something that cannot be avoided. This is caused by a number of factors such as supply of housing, availability of mortgages, interest rates, new builds and the number of households. All of these factors have an affect on house prices, causing them to either rise or fall to some degree. When house prices fall, homes become more affordable and this is often seen as a factor that affects the market the most.
When homes are more affordable, more people are able to buy. This is because downpayments become less, mortgages are more affordable and the overall price of buying a house drops considerably. However, this then means that there are less available properties on the market for buyers to choose from. With a lot of people all fighting for a limited number of affordable homes, the price of them then increases. This is all part of supply and demand. When homes are more affordable and more people are able to buy, the price of remaining properties skyrockets as there’s less to go around.
It’s easy to focus on the fact that more affordable homes does cause the market to fluctuate, but that is not the whole story. Home affordability is actually a positive for buyers and the housing market on the whole. It’s not just a case of affordable homes meaning that house prices will inevitably rise. When homes are more affordable, buyers have more options. They are not as limited as to the type of property that they can afford and first time buyers find it easier to get on the property ladder, something that a lot of people struggle with. This gives the housing market a huge boost, as there are more buyers out there to keep transactions moving. It makes for a strong housing market.
It’s easy to focus on the fact that home affordability causes house prices to rise and fall, making for a somewhat unstable market at certain times. However, it’s important to note that it also gives many buyers better opportunities. Without homes becoming more affordable, a lot of people would struggle to invest in property altogether.