Humber/Ontario Real Estate Course 4 Exam Practice

Which of the following factors could result in increased demand for residential properties?

1. An increase in the family formation rate.

2. An increase in mortgage interest rates.

3. An increase in the unemployment rate.

4. A significant increase in personal debt.

The correct answer is: An increase in the family formation rate.

The increase in the family formation rate can lead to increased demand for residential properties because as more individuals form families, there is generally a need for additional housing. This trend can be attributed to several factors: young adults moving out from their parents' homes, couples getting married, or individuals having children. As these households begin to form, they typically look for larger living spaces, which creates a demand for residential properties. As demand increases, it can lead to higher property values and more activity in the housing market. The other factors listed do not typically result in increased demand. For example, an increase in mortgage interest rates usually discourages buyers since higher rates make borrowing more expensive, leading to reduced purchasing power. Similarly, an increase in the unemployment rate suggests economic difficulties, which can dampen consumer confidence and lessen demand for housing. An increase in personal debt can also constrain buyers' ability to take on new debt, such as mortgages, further decreasing demand for residential properties.