The majority of home buyers purchase their property with hopes that it will appreciate in value over time. Location, size, condition and amenities are all important aspects that will help determine your property’s value, but what about the housing market as a whole?

            The first half of this century has produced phenomenal wealth for real estate investors and most fortunate home owners. Now that the market is falling back a little, what can we expect in the future, and why?

            Realty Times columnist, Peter G. Miller, explains in his October 3, 2006 article, “What Will Your Home Be Worth?” how the factors you would probably expect to have the most impact on future home values may only play a small role.

“At first it may seem like a distant idea: Who cares about prices in the coming decade when the more immediate issue is what's happening today? Since most owners aren't actually selling at this moment, 2015 or thereabouts represents the end-game for many of today's homeowners, the time when properties will be sold and profits will hopefully be pocketed.”

The National Association of Home Builders (NAHB) has produced a fascinating long-term study which proposes that home sales and production will slow over the next several years. This is in part due to higher mortgages interest rates but the actual number of homes constructed over the long-term will depend less on interest rates and more on demographic trends and how housing stock is utilized.

So, why are interest rates and population growth less important to long-term supply and demand than the way homes are used?

Economists predict the future of the market and they are concerned with three contributing changes.

The first thing they look at is “Changes in the number of households -- more households equal more demand. If local housing stocks do not expand sufficiently then prices can rise substantially.”

Economists then determine “Changes in the number of vacant homes -- more vacancies suggest reduced demand, fewer vacancies mean higher prices and rents.”

And the third important predictor is “Changes in ‘net removals’ from the housing stock -- fewer properties to sell or rent raise the value of those properties that remain if demand is constant.”

There are several other smaller contributing factors to consider in predicting future home values. One such is “headship rates,” meaning that the predicting the number of households relative to total population has become increasingly difficult due to more adults living with their parents, siblings and other friends and relatives.

“‘While headship rate changes are not expected to have much effect on overall growth in the number of households,’ says NAHB, ‘changes in the population in each age group will produce large changes in the number of households, in the characteristics of households, and in the types of housing demanded.’”

In effect, taking into account factors such as demographics, housing demand, labor force participation and mortgage rates, the NAHB says that builders are likely experience increased production levels compared to last decade. The amount of newly constructed conventional homes will increase from 2006 to 2015.

            Homes will be ever-increasing in demand which will result in higher home values in the future. Buy and invest in property so you can enjoy a relaxing retirement in the future.