Final answer:
A decrease in interest rates will increase the overall demand for homes as it makes borrowing more affordable, conversely, a fall in demand and a rise in supply of loanable funds in the financial market will lead to a decline in interest rates.
Step-by-step explanation:
The factor that will increase the overall demand for homes is a decrease in interest rates. Bringing down interest rates makes borrowing more affordable, which generally stimulates homebuying by reducing the cost of mortgage loans. People are more likely to purchase homes when they can benefit from a lower interest expense over the life of their loan. In comparison, a decrease in consumer income, an increase in property taxes, and even a decrease in the price of homes do not directly increase demand, although a lower home price might make homes more accessible, but does not affect the ability or desire of consumers to purchase.
Concerning changes in the financial market that lead to a decline in interest rates, both a fall in demand for loans and a rise in the supply of loanable funds can contribute to this outcome. Lower demand may occur when consumers and businesses are borrowing less, prompting lenders to reduce interest rates to entice borrowers. An increased supply of loanable funds usually happens when more savings are available to lend, which often results in increased competition among lenders, thereby reducing the rates they charge to borrowers.