What Influences The Demand Of Real Estate?
According to the Florida Real Estate Commission, there are five variables that influence the demand of real estate. I renamed them so they all start with the letter P. They are:
- Price of real estate – When the price of the house goes up, the demand goes down.
- Population – The bigger the population, the bigger the demand for real estate.
- Paycheck – When your paycheck increases, your interest in buying real estate increases.
- Percent – I’m referring to the mortgage interest rate. When mortgage credit is readily available, it is cheaper, which means your monthly payments are cheaper. That increases the demand for real estate.
- Preferences – This boils down to what people like and don’t like. When I was kid, you could not give away houses in downtown Orlando. Everyone wanted to live in the suburbs. Today, downtown Orlando is the hot place to be. It’s just what is popular at a given time.
Here’s a study tip about lists like this: When there is a list of 3-5 related items like this in your real estate textbook, there is a good chance that the question will be, “Which one is NOT ___?” This is a popular question format on the Florida real estate exam. For example, a question testing your knowledge to know the variables that influence demand might be something like this:
Which variable does NOT influence the demand of real estate?
a. Price of real estate
b. Supply of housing
c. Availability of mortgage credit
d. Income of consumers
The best way to handle this question format is to ask yourself about each choice.
- Does the price of real estate influence demand? Yes. There is greater demand for a $200,000 home than a $2,000,000 home.
- Does the supply of housing influence demand? I don’t think so, but let’s read the other choices to be sure.
- Does the available of mortgage credit influence demand? Yes, that is “percent” on our list. When the interest rate is 3%, the demand for housing is greater than when the interest rate is 10%.
- Does the income of consumers influence demand? Yes, that is “paycheck” on our list. Someone who makes $200,000 a year is more likely to buy a house than someone who makes $20,000 a year.
So the correct answer is B. Supply of housing does not influence the demand of real estate.
If you want to learn more memory tools or test-taking tips for the state exam, join me in a class at Demetree School of Real Estate.
Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.