Real estate construction is a volatile process determined by the interaction of the user, developer and capital markets. What factors affect the volatility of real estate construction and commercial and residential real estate development

Real estate market is a unique business in a sense that each product is different and each product has a different value, e.g. two houses with identical blueprints are different due to location and by how well they have taken care off. Another aspect that makes real estate so special is that generally it represents its owners largest asset. Unless you are very wealthy, your house is usually your most valuable possession.

Real estate markets are very volatile. They might be increasing at a rapid pace and then suddenly everything collapses. Remember the great recession back in 2007? Any change in capital markets affects directly the real estate market, even though they are not directly related. E.g. interest rates increase, real estate suffers.

Since construction costs include many items that are not interchangeable, they are highly volatile. They include thousands of different parts that are not necessarily standardized or are not purchased in bulk. E.g. cars also contain thousands of parts, but each car has the same parts (parts are interchangeable). You cannot take a house's wall and place it another house, but you can take a car's wheel and use it in another car.

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