Supply and Demand in the Housing Market

The Business Cycle and Buying a Home

When the supply of available homes is greater than the supply of buyers, appreciation may slow and prices may even fall, as happened in the early eighties, the early to mid-nineties and currently. This the classic buyer’s market.

If you are lucky enough to purchase a home during a slow housing market, you can be reasonably certain the economy will begin to show strength again soon and home prices will eventually rise.

Unemployment and the ability to obtain financing have great effects on the housing market. People without jobs can’t buy homes. When the jobs market grows so will the housing market. More people who were renters will have adequate employment to qualify for loans and be able to purchase a home. Supplies will shrink as the increasing demand by home buyers rises.

Supply and demand is a constant force that makes the housing market unpredictable at times. It is only when we look back in time that we can see the ultimate highs and lows the market reaches during the business cycle. So far, nobody has been able to accurately predict the future. This holds true for the real estate market as well.