Humber/Ontario Real Estate Course 3 Exam Practice

If a city’s unemployment rates have been rising over the past two years, what is typically the impact on buyer demand?

1. Rising unemployment typically leads to increased buyer demand due to the perceived buyer's market.

2. Stable employment rates typically indicate a buyer's market.

3. Rising unemployment rates can result in personal financial hardship and dampen buyer demand.

4. Increasing residential mortgage rates typically improve housing affordability.

5. Rising family formation rates have little impact on the real estate market.

6. Stable employment rates typically signal an increase in housing prices.

The correct answer is: Rising unemployment rates can result in personal financial hardship and dampen buyer demand.

When unemployment rates are on the rise, individuals often experience financial uncertainty and instability. Many may face job loss or reduced income, which directly impacts their ability to afford a home. With less disposable income and uncertainty about future employment, potential buyers may postpone or forego their home-buying plans, leading to a decrease in overall buyer demand in the real estate market. This correlation is significant because the housing market typically thrives when consumer confidence is high and jobs are stable. Higher unemployment can lead to a more cautious approach to spending, particularly large purchases such as homes, thereby dampening the enthusiasm for buying property. The impact is further accentuated by the fact that lenders are more stringent in their requirements during times of economic uncertainty, which can result in fewer approvals for mortgages. The other options do not accurately reflect the relationship between rising unemployment and buyer demand or address unrelated factors in the housing market.