Generic filters
Exact matches only
Generic filters
Exact matches only
Economic Indicators that Affect Real Estate Investments

Seasoned investors recognize the importance of closely observing economic indicators that affect real estate markets. With years of experience following economic trends that can have a direct impact on my rental properties, I know firsthand how important it is to stay updated with the latest metrics. I’ve found that it’s essential in making informed decisions that can optimize returns.

You see, they’re not just merely data points; they’re essential markers that provide critical insights into how the real estate sector might perform. These indicators, ranging from employment rates, GDP growth, inflation figures, to more specialized data such as mortgage rates and housing starts, influence the balance of supply and demand in the rental landscape, among other aspects of the real estate sector. For property investors and landlords, understanding these economic drivers can play a big role in their success.

This article aims to provide you with a guide on which economic factors influence real estate and why they’re important.

Monitoring Economic Indicators that Affect Real Estate Markets

If your plan is to safeguard your investments and make informed decisions on where to allocate funds, you’ll find that regularly analyzing economic indicators can provide the knowledge needed to make that happen. By staying on top of these factors, investors can predict changes in demand, adjust their strategies, and optimize their return on investment. This attention to economic signals not only helps in sorting through the complexities of the rental real estate market but also in identifying potential opportunities for growth and investment. With that said, let’s get started by diving into some of the most important economic measures that can impact the real estate market.

1. Consumer Price Index (CPI)

I’ll start with the Consumer Price Index, which provides essential information about inflation. The U.S. Bureau of Labor Statistics describes the CPI as the following:

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas.

A CPI report helps to assess inflation and the cost of living; these data sets are important to track because they eventually make their way over to the rental market. I’d like to point out that I’ve noticed that while the rest of the economy, which includes large and small businesses, as well as consumers, have suffered during times of high inflation, I’ve actually benefited. How is this the case? Well, my rental properties have increased in value during these times.

This is good because it increases my equity, which I can use as a downpayment for an additional property. I’ve also been able to raise the rent to match the rising costs of goods and services, which increases my cash flow. As you can see, rental properties serve as a great hedge against inflation. Dive into our post titled – Why Rental Properties are a Safe Investment During Times of High Inflation. Also, see our post – Mortgage Rates Surge Following CPI Report to get a well-rounded view of inflation data and its effects on the housing market.

2. Gross Domestic Product (GDP)

The GDP report measures the total value of all goods and services produced within a country over a specific period, serving as an indicator of the country’s economic health and growth rate. When the GDP grows, it usually means the economy is doing well. This boosts people’s confidence to spend more because they often have higher incomes. For the rental real estate market, this can be good news. A stronger economy with a growing GDP can lead to a higher demand for properties because people have more funds for renting. This can also drive up property values and rental prices, presenting lucrative opportunities for real estate investors.

Economic Indicators that Influence the Real Estate Market

When a GDP report is released, the stock market reacts, and this can directly impact those who have their money in a 401(k) plan. When disappointing GDP data hits the media, retirement accounts can take a dive. This happened recently when the report revealed a sluggish growth of just 1.6% in the first quarter of this year. The Dow Jones Industrial Average took a downward turn to 663 points, and the Nasdaq Composite and S&P 500 were also impacted. If you’re unsure how your 401(k) will stand up to economic factors such as this, then you’ll want to take a look at the following article – Reasons Why the 401(k) is a Bad Investment Vehicle to Retire On. Also, take a moment to head over to our article for details on the latest GDP report – Investors Hit Financially as Major U.S. Indexes Fall in Repose to GDP Report.

3. The Jobs Report – Employment Data

There’s a significant link between job data and the dynamics of renting out a property. High employment rates can signal a booming economy where more individuals have the financial stability to afford rental properties, which can increase demand and potentially raise property values. In contrast, rising unemployment can decrease demand and affect the rental market in a negative way on several levels. In some cases, it can cause neighborhoods to decline and become riddled with crime. Because of this, analyzing employment statistics, such as job growth and unemployment figures, is crucial for landlords and investors to determine the financial potential of certain rental markets.

Lubbock TX Boasts a Thriving Economy and Consistent Low Unemployment Rate

One particular city that has a robust economy and employment figures to match is Lubbock, TX. This West Texas city is filled with employment opportunities, and offers a low unemployment rate. Why is this the case? Lubbock houses large colleges, hospitals, Fortune 500 companies, and other vital places of employment. This reels in workers from other areas and keeps people in place. As a result, the demand for rentals surges and maintains that level. This is apparent in the fact that there are often waiting lists within Lubbock to get into a rental because the demand is through the roof.

Lubbock is so prosperous and thriving that its economy even withstood the height of the pandemic. While other cities saw businesses close down left and right, Lubbock kept pushing forward. This is due to the abundance of stable jobs, as well as the diversity of jobs it offers. For instance, Lubbock is a huge healthcare hub, and we know that hospitals don’t shut down, even when a pandemic hits. Hospitals employ thousands, and these people kept their jobs when COVID made its appearance. You’ll want to read this article; it’s pretty interesting – Lubbock Recognized as Recession-Proof City and Maintained a Strong Rental Market Throughout Pandemic.

Morris Invest builds new construction properties within the city of Lubbock. If you’re interested in hearing about our properties and the specific locations we build in, or would like to be added to our waiting list of available rental properties, schedule a call with our team.

4. Interest Rates & Mortgage Rates

Among the many economic indicators that affect real estate investments, interest rates and mortgage rates play a huge role, and I keep a close eye on both. When interest rates rise, obtaining mortgages becomes more expensive for potential homebuyers, which causes many to delay purchasing a home. This increases the demand for rental properties, driving up rental prices as more individuals are forced to rent. In contrast, when interest rates are low, mortgages become more affordable, encouraging buying over renting, which can decrease rental demand and stabilize or even reduce rental prices. Therefore, understanding the dynamics of interest rates, as well as mortgage rates is critical for serious investors because the rates directly influence property investment returns and occupancy rates.

As of today, interest rates and mortgage rates are elevated, which has contributed to the current housing shortage. This is the case because sellers are unwilling to give up the low mortgage rates that they have locked in. Also, potential buyers are playing the waiting game, holding out for rates to lower. The situation has caused rents to surge significantly due to the high demand for rental properties. Along with this, the housing shortage has caused home prices to climb, which has increased the equity for property owners. Jump into our latest article on the Feds leaving the interest rate unchanged to get even more details on the impacts of high rates.

Economic Economic Drivers that Shift Real Estate Market Trends

With rates elevated, it may seem like waiting might be a wise choice. However, investing now can be beneficial due to the increased demand for rentals and the current dip in housing market activity. A slow housing market helps investors dodge competitive bidding wars that inflate property prices. Additionally, with housing prices projected to climb, securing properties at today’s costs, before they rise further, is a smart strategy. I’ve picked up a few properties during this time, and so have many of my clients, and this article takes a deep dive into why that’s the case – Record High Mortgage Rates Drive Up Demand for Rental Properties.

5. Vacancy Rate Report

The vacancy report is an important factor to consider when evaluating a rental market, as it provides key metrics into the supply and demand dynamics of rental properties. A high vacancy rate suggests an oversupply of rental units, leading to a competitive market where landlords might reduce prices or offer incentives to attract tenants. This can benefit renters who might find more options within their budget, allowing them to negotiate better lease terms.

In contrast, a low vacancy rate indicates a tight rental market, where the demand for rental units exceeds the supply. This scenario can lead to increased rent and a higher ROI. Currently, the vacancy rate is 6.6 percent, indicating a tight rental market, as reported by the Census Bureau. This also indicates a good time to jump into the market because demand for rentals is high, and so are rents.

Resources for Real Estate Investors

Take a look at our resources below that provide financial and investment information to those who wish to become independent through real estate investing:

Evaluating Economic Metrics is Essential for Making Smart Property Investment Decisions

Through experience, I’ve come to understand the importance of keeping a close watch on economic indicators that affect real estate. This is especially true given the current state of the economy, which is plagued with high interest rates and surging mortgage rates, as well as high inflation. With rates high and the market slow, investors are presented with the opportunity to obtain a new construction rental property at a lower price before the market becomes saturated when rates eventually calm down. For those concerned about committing to higher rates, understand that refinancing is an option once rates decrease. I’ve taken advantage of this strategy often because you can’t change the purchase price, but you can adjust the interest rate in the future.

If you’d like to speak with one of our team members to discuss how you can invest in a lucrative rental property, schedule a free 30-minute call with Morris Invest. We make owning rental real estate super simple for our clients; we even place a tenant in each rental, as well as assign an experienced property manager. The team looks forward to discussing your real estate investment goals and helping you reach financial freedom. In the meantime, be sure to dive into the video below that touches on some concerning facts regarding the national debt:

Ready To Build Passive Income Through Rental Real Estate?


Ready to talk about your goals? We're here to show you the tools and teach you the process to begin earning legacy wealth for you and your family.

Schedule a consultation