Featured News 2012 U.S. Home Prices and Supply and Demand

U.S. Home Prices and Supply and Demand

Have you ever noticed the variant of house prices depending on which location you are shopping in? If you want a tiny condo in New York City, you may need to pay just as much or more as you would for a sprawling estate in Arkansas or Tennessee. Why is it that a home can cost so much in one place, and so little in another? Imagine that you built the same house in different locations. It was placed in a Fort Lauderdale, Florida location, a Beverly Hills, California plot, and in a small town in Oklahoma. Naturally, the one in Oklahoma would sell for much less than the other two, even though the home is identical to the houses in Florida and California. This is all about supply and demand.

What is supply and demand, and why does it govern the prices of homes? Well, let's look first at supply. When homebuilders construct and sell a home, they need to determine the cost of a lot of significant factors. First of all, what was the cost of the materials used to build the home? A person who wants a rich oak-wood floors, large pristine windows, and a curling marble staircase is going to have to pay more than someone who wants a standard house. Wood versus drywall, heavy doors versus light doors, thick walls versus thin walls, rich cupboards versus basic ones, granite counter tops versus tile and many other decisions will either make a home more expensive or cheaper.

Also, you need to evaluate the cost of labor. Did the homebuilder need to bring in extra workers to have the home finished faster? Were there any complications with the building that took more time and effort? In addition, homebuilders consider the amount of land surrounding the home. Maybe you have a home that is on 5 acres of land, and an identical one in a similar area that is on half of an acre. The one with 5 acres will probably sell for more, because the buyer will own more land. In fact, many homes are valued based on how much land comes with them. People are often willing to pay more for a large front yard and back yard. Everyone loves to have their space.

Other factors that add to the supply side of supply and demand are the access to capital financing in this area and the number of homes already available for sale in that particular market. On top of all of this, the home will be worth more if it is of a style and taste that appeals to the public. Just like clothing, there are housing trends. Some styles may always be classic and attractive, but many people want a certain style of home. A cottage may be in high demand in one state, a log cabin in one, a rustic Italian construction in another, and a modern penthouse in a metropolitan area.

Along with supply, you home will be valued base d on demand. Essentially, demand is how confident and secure a buyer feels in purchasing a home at a given time. Also, the service associated with a mortgage affects the buyer. The unemployment rate, mortgage rates, and easy with which a homebuyer can get financing are all pieces of this intricate puzzle. When the economy is low, or people aren't in the mood to purchase real estate, the housing market is affected. When you bring supply and demand together, you get a lot of the factors that give a home the price that it has. If you are thinking about purchasing or selling real estate, look at the supply and demand in the area that you are considering to figure out whether or not you are making a wise investment.

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