Supply and Demand
March 25, 2012
Supply and Demand
Supply is the amount and type of real estate available for sale or rent at differing price levels in a given real estate market. Demand is the amount and type of real estate desired for purchase or rent in a given market at a given period of time.
In the real estate market there are factors that affect the supply and demand. One of the factors that affect the supply is the availability of loans and financing to build new homes. When the market crashed the availability of loans and financing of a home became very scarce. Because of the availability of home loans and financing it has made the supply of new homes go down, with no loans or financing there is no money to be able to afford land to build on or to pay a skilled contractor. When there is no availability for new homes the demand seems to be higher.
When the supply is affected in the housing market the prices ...view middle of the document...
The value of real property is determined by the principle of substitute. The principal of substitute is simply the price a person is willing to pay for a property is influenced by the cost of buy the substitute or comparable property. This means if a home is selling at $175,000 and another home right down the street is going for $150,000, then it is likely that no one will purchase the home selling for $175,000. Another substitute that affects the supply and demand in the housing market is the appraisal that is used. When someone is interested in buying a house the bank or realtor will appraise the property and other properties around it so that they can adjust the selling price based on factors that will affect the housing market.
Some complements of buying a house is where the location of the property is. When many people are looking to buy a house they factor in how close schools are. Many people like to buy homes in roughly a five to ten mile ratio of a school so that they do not have to travel very far to take their children to school. Consumers also take into consideration how far they will have to travel to work from their new home. Consumers also consider the long term aspects of where they purchase their new home. One of the big questions is will this be a long term investment or short term investment. Financially people have to consider what they can afford to spend which makes the supply and demand fluctuate.
Purchasing a new home is elastic. When the supply goes up the demand goes down. Which means when the prices of purchasing a new house goes up the demand of new homes go down? However, when the price of the supply goes down the demand of a new home goes up. This is a necessity to many consumers who are trying to buy a new home, because they are always looking for the opportune moment when the prices go down so that they can get the best rates and prices to buy.
When making a decision about buying a new house, consumers must consider the supply and demand of the housing market. The factors the must be taken in consideration are weather the supply is up which means the prices of purchasing a house or if the demand is low. Trying to figure out the financial aspects is also a huge factor in the supply and demand of the housing market.