The real estate market is heavily influenced by social and economical factors that effect the price of dwellings. Two of the main factors that contribute to not only the housing market but most consumables are supply and demand.
Supply is the amount of one good or service in that market. A market driven economy could utilize supply to regulate price. Generally, if the supply is higher than the demand for that good the price will be lower. If the supply is lower than the demand, the price will tend to increase.
Demand is the amount of consumers that want/need that good or service. Price is also influenced by demand. Generally, if the demand is higher than the supply the price will increase. If the demand is lower than the supply, the price tends to decrease.
Price can be derived from demand and supply.
The following model depicts how the changes in supply and demand of Households effect pricing. The sliders replicate how each of the variables interact with price.
Secondary factors, such as interest rate, foreign investors and government policies also all weigh in on determining a price for a dwelling.