The real estate market is the supply and demand for residential, commercial, and industrial properties. It is an important market, because property is an asset that can be used for both income and wealth creation. It is also a major source of employment, because it provides services such as real estate brokerage and appraisal. Real estate includes land and buildings on it, as well as the natural resources within a property’s boundaries, such as minerals, water and crops. The real estate market comprises of users, investors, developers and facilitators. Users include homeowners and businesses that use property for their operations. Investors are people who acquire and hold real estate for profit. Developers are those who build or renovate buildings on real estate for sale in the market. Facilitators include brokers, agents and government regulators.
Heterogeneity
Heterogeneity of the real estate market imposes considerable difficulties on pricing and the analysis of investment opportunities. It increases search costs, creates information asymmetry and restricts substitutability. Heterogeneity also increases the risk of misallocation of capital.
Seasonality
The real estate market is seasonal, with activity peaking in the summer and dipping during the winter. As a result, real estate prices can be volatile from one month to the next. They are also influenced by the economy, which can influence local property demand and prices. This is because local economic conditions, such as employment levels and incomes, affect people’s willingness to pay for houses. Additionally, interest rates can impact demand and price. Government policies and legislation, such as tax credits, deductions and subsidies can also temporarily boost demand for real estate.