How US Real Estate Policy Changes Impact Market Performance

By real estate, policy, finance    20 May,2024

   Real estate, like any industry, is governed by policy. Policies are used to drive certain industry performance, however are often influenced by other socio-economic factors as well.

 Hence, policies can either boost the real estate industry’s growth or restrict it. How do policy changes impact market performance though?

Policies have a direct impact on the real estate industry as they clearly specify the ground rules on which all stakeholders must act. 

Considering this, many past US real estate policy changes have shaped market performance. A few examples of this are the Dodd-Frank Act, the Energy Policy Act, and the Uniform Electronic Transactions Act. All of these helped the US in driving desired market performance. 

In this article, we will focus on how US real estate policy changes have impacted market performance in the past and what to expect in the future.

Policy Impact on Property Demand and Supply

The entire real estate market works on the forces of supply and demand. Therefore, the first impact that policy changes have are on either the supply or demand of properties that inadvertently affect pricing and drive consumer behavior.    

US lawmakers have in the past passed bills and policies that have lax repayment terms, down payment assistance programs, tax credits and discounted interest rates for first-time homebuyers.

These policies are generally launched to increase property demand. This is a good time for homebuyers to look into purchasing property due to the subsidies available.

On the other hand, post the US housing crisis of 2008-2009, strict policies were more prevalent as they wanted to curb demand.

Hence, when there are real estate policies that impose higher regulations, require standard checks, and restrict development, housing supply suffers and prices are driven upwards. Here, as expected, homebuying is not a smart move.

Other policy elements that impact the housing market performance are lending regulations for mortgages, along with general fiscal policies that affect the public’s purchasing power.

Policy Impact on Real Estate Pricing

We have read above how US real estate policy changes impact the market performance and forces of supply and demand. It is also important to note that these real estate policy changes have a direct effect on pricing as well.

Taxes and interest rates on mortgages make up the largest portion of the home purchasing price after the down payment. However, this is often broken up into installments, yet every year this payment is an increased cost for the homebuyer. 

Real estate, tax, and lending policies collectively impact the price of the home purchase, and can benefit the seller significantly as well. By either raising these costs or subsidizing them, policymakers impact the market performance.

Similarly, we previously talked about how real estate policies also focus on developmental regulation and other construction sites. While this affects supply and demand, it also impacts real estate pricing.

Both of these are directly proportional. The higher it costs to construct and develop real estate projects, the higher they will be priced and impact the affordability of the house. 

Policies on Foreclosure and their Impact

There are certain US real estate policies that focus on foreclosure. The prime example of one of these policy changes is the Dodd-Frank Act which included measures to assist homeowners who were at the risk of foreclosure.

The measures in the Act that supported these homeowners eased the decline in prices and helped people in refinancing or modifying their mortgage terms.

Policies like the Dodd-Frank Act help stabilize these rapid and steep price declines and ensure that the market does not suffer a major impact. 

Policy Impact on Investor and Market Confidence

The US real estate sector is a significant interest for investors and other consumers.

Many people, even when they do not require housing or do not have any particular stake in developmental projects, often invest in the industry. This is because of the long but high-yield returns that are offered by the sector. 

Real estate policy changes have a direct impact on pricing, and supply and demand of projects. However, indirectly they also have a substantial effect on the investment and funding for the sector.

If policy changes are bringing stability to the US real estate market, they will bring confidence to consumers as well as investors and positively impact the industry performance. 

Likewise, if policy changes are largely restrictive or reduce transparency in the long-run, investors are likely to pull out their funds, and market performance is doomed to suffer. The same is true for any change in government-funded construction projects.

Real Estate Policy Changes and What to Expect in 2024?

In the US, policy has governed the real estate industry for a long and effective time. While the past two decades provided great reform for the US housing market, its impact has been long-lasting.

In 2024, there is now a greater focus on digitization and sustainable efforts in every field. The real estate industry is expected to follow the same path.

More effective and reformative policies regarding digitization and green initiatives can be implemented in 2024.

These policies will shape market performance in a progressive way where housing projects will be encouraged and incentivized in acting sustainably.

Incentives could include tax benefits and discounts, lower interest rates on funding for these green and digital projects, and ease in regulation and checks. 

The Vital Role of US Real Estate Policy in Industry Growth

US real estate policy is the backbone behind the growth of the industry. While there are cyclical periods of booms and recession, multiple economic factors contribute to the success of this industry.

While the US housing market is considered to be at the forefront in terms of stability and investments, there have been some ups and downs in the past two decades (especially in the 2010’s ).

With corrective and restitutive policy reforms, the real estate industry was positively impacted and the market grew steadily.

We can expect that as long as the US policymakers and real estate professionals have the long-term benefits of the industry in mind, the sector can and will experience positive changes in the near future. 

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