What influences real estate prices?
Real estate prices suffer from many of the same pressures as the prices of anything else, including supply and demand. A large contributor to the rapid increase in real estate prices was a limited housing inventory that was made worse by a significant demand for housing. Any time that happens, prices will go up, whether the item in question is a house, a car, or a box of donuts.
Housing costs also suffer from additional pressures that donuts generally don't, including mortgage interest rates and government policies. When interest rates are low, demand can skyrocket, which pushes housing prices high -- and with real estate, it's often difficult or impossible to bring these prices back down without significant economic damage. Government policies can also make a big difference, especially if they cause an increase in demand, like first-time home buyer incentives or tax breaks for homeowners.
Investors can also increase real estate prices, although their activity is not generally believed to be as significant as the collective power of individual buyers in the single-family housing market. Where investors make bigger dents is with increases in apartment rents across large complexes and the rejuvenation of neighborhoods to the point of gentrification.