Factor 1: Employment
Employment is how people afford their homes, so most people live near their jobs. When a location experiences an increase in employment, there will typically be an increase in the amount of people moving to that particular area. This could result in a drastic improvement the local real estate market.
Factor 2: Supply
Supply is the total amount of houses for sale or units available on the market right now in your area. The typical benchmark for this is six months, which is what investors consider a healthy market. If there is less than a six month worth of supply of houses, there is a potential for a shortage. A shortage could raise demand and potentially raise prices. If there is more than six months worth of supply of houses, then there could potentially be a surplus, which could cause problems or even slight price drops.
Factor 3: Affordability
Ultimately, your local real estate market is going to be predicted on the people’s ability to afford the homes. You could live in absolute paradise, but if people can’t afford the homes, there’s a problem. For example, Puerto Rico, is one of the most beautiful places on earth with some of the nicest people in the world, but the unemployment rate is staggeringly high, and more than 50% of their people live below the poverty level. Their largest employer is the Puerto Rican government and they just filed the largest “state” bankruptcy in history. Even though Puerto Rico is paradise, their real estate market is a complete train wreck.