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How Does House Prices Affect The Demand And Shortage Of Homes?

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In the article “U.S. house prices to rise on strong demand and shortage of homes” written by Hari Kishan and Rahul Karunakar, it explains how throughout the years labor markets have been rapidly growing but are also causing the prices for houses to rise. This increase in price causes the demand curve to shift to the right. The shift in the demand curve causes issues for those who want to buy a home but cannot find an affordable house. The higher prices for purchasing a house causes its complement good, renting and leasing, to have an upward shift in the demand curve. Furthermore, the demand and supply can vary from neighborhood to neighborhood. A house of the same size and features could being sold more expensively in one neighborhood then …show more content…

If home buyers begin to reduce the amount of homes that are being purchased this would mean that the demand for homes will begin to decrease. This new lower demand for homes would then change the equilibrium quantity, eventually cause the equilibrium price to have to go down. This decrease in price would cause the demand curve to shift to the left. The equilibrium price “is the price at which the quantity demanded equals the quantity supplied” (Rittenberg, 2013, p. 81). Equilibrium price is determined by the intersection of the demand and supply curves. At its core supply and demand is a relationship between how much something is wanted to purchased and how much of that product or service is available. That relationship affects the price of the good or service. For example, when there is a high supply but a low demand there is a surplus or oversupply which in turn means lower prices. If the supply is limited and the demand is high this means a higher prices for that product or service. The same applies to real estate if there are many homes in the market but no one is willing to purchase them, then there is an oversupply and will cause the prices of the houses to drop. If there are a limited amount of houses and the demand is high this means there will be multiple people trying to buy the same house which will equate to that house being sold at a higher

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