How Supply, And Demand, Impacts Real Estate?
Have you ever wondered, why, we often witness, certain periods, where houses appear over – priced, and, others, when, prices are far more reasonable? Why do we, sometimes, notice, a seller market (where there are more buyers than homes, for sale), and, at other times, a buyers market (more homes, for sale, than qualified, potential buyers)? In economics, there is the theory of Supply And Demand, which states, pricing is directly related, to the supply, versus the demand. When there are more buyers (qualified), than sellers, prices generally go up, and the amount of time, houses remain on the market, goes down. When we undergo the opposite scenario, we generally will notice, prices dropping, and homes, taking longer, to sell. Of course, we often, witness, periods, in – between, which we consider a balanced, or normal market. Unless you have a trusted, crystal ball, it is often challenging, to predict, far, in – advance, what will occur.
1. High supply and low demand: If the supply of houses available, is high, and there is relatively, low demand (few qualified buyers), the buyers have the advantage, and, often, become capable of negotiating, far more successfully. This combination, generally, brings about, the optimal, buyers market!
2. High supply and high demand: When there are, both, a large supply of houses, available, many qualified, potential buyers, we have a balanced, or normal market, and a competitive situation.
3. Low supply and high demand: When the number of qualified buyers, is greater than the houses, available on the market, we often, witness, a sellers market. This creates, depending on the specific house, and local real estate market, the potential, for rapidly, rising prices, and, even, bidding wars. During this period, larger down – payments, cash deals, no mortgage – contingency scenarios, etc, are often, witnessed, in order to create a competitive advantage.
4. Low supply and low demand: At times, when there are both, few sellers, as well as a limited number of buyers, every situation, requires a skilled, real estate professional, in order to differentiate a specific house, versus the competition.
Wise real estate agents, discuss these possibilities, up – front, with their clients, so they are prepared, for the ramifications, and impacts, of each. When this is done, the transaction period becomes far less – stressful, and homeowners, realize, that changes, might occur, quickly, and without advance notice. Beware of factors, such as changing interest rates, consumer confidence, and other economic indicators, which might bring about, these changes!