Read full document

Supply and Demand

By | Feb. 2011
Page 1 of 1
The Effect of Supply and Demand on Real Estate

My husband and I are in the process of purchasing a newly constructed home that is to be finished by the end of April 2011. We feel very blessed that we have the jobs that we have and can purchase our home and contribute to the health of our economy. According to “Truth About,” realty accounts for nearly two-thirds of the nation’s net worth, accounts for several jobs, and plays a big part in the production process. The supply of houses in our area and many others is abundant and there is little demand. However, this is changing at an alarming rate and the builders are starting to increase their asking prices in return. The role of supply and demand in real estate has played an important role on our being able to purchase our home as many others purchasing homes as well.

As the “Truth About” stated in their article, “Real Estate Supply and Demand,” real estate is cyclical, it booms, and busts. When demand is low because of the lack of employment, or wage loss, etc. and supply is high the Equilibrium Price thus will go down and could result in a bust. When demand is high and supply is low, then the housing industry could risk a potential boom. This is because then it is possible to over build that could lead to home abandonment or foreclosures. According to the “Truth About” to keep Equilibrium Price and Equilibrium Quantity in the housing market, new construction should not exceed 3% of the housing supply.

There are many factors which are considered in regard to both supply and demand and real estate, such as the cities themselves and their growth rate for employment, or the popularity of a certain neighborhood, and the list goes on. For a home buyer like myself there is a concern that if demand increases and mortgage rates as well as the homes themselves go up, I may not be able to afford the home I am building, which could be the case for many others, and could also lead to...

Rate this document

What do you think about the quality of this document?

Share this document

Let your classmates know about this document and more at