Over the past few years, it has been hard to get mortgages or refinance on a home because of rising housing supply, and over the next several years this trend is only going to get worse. With each passing day, house prices continue to rise, making home ownership a necessity, not a luxury.
Rising house prices and household consumption are two factors that are often considered when thinking about the housing market. While the former is always a good thing, the other factor is of less importance but is still a huge factor in determining market conditions. Household demand for homes is directly related to the amount of housing supply, so the more supply we have, the lower the housing market will go.
Supply is closely related to the demand, which means that more supply and more people looking for homes will increase demand for homes and reduce supply. It is very difficult to change policy like this, so it is best to plan ahead if you are interested in purchasing a home in the near future.
Demand, on the other hand, is not as easily controlled by market forces. Because it is harder to control supply than demand, prices will continue to rise for as long as there are people looking for homes. However, the supply will likely be used up soon, so prices will begin to decline as soon as the available supply is exhausted.
A decline in supply will lead to a change in demand
The most obvious way that we will see an effect on housing supply and demand is through the decline in interest rates. Interest rates have increased in recent months, and there is no telling what might happen with interest rates moving upward. For instance, if interest rates start to go up from the current level of a little above two percent, it could cause a significant decline in supply.
On the other hand, if the situation is reversed and interest rates start to decline, and our population is growing in number, we would expect a large increase in the supply of homes in the United States. Again, however, this would not be good news for home buyers, since rising housing supply would result in rising prices.
As a result, it is imperative that we have a plan in place to deal with changing market conditions. There is nothing wrong with just sitting back and watching market trends as they develop, but if you want to see changes in your home’s price over time, you need to keep tabs on housing supply and demand.
Trends in the housing market are notoriously difficult to predict, and so anyone investing in the real estate market needs to learn how to read these trends. The change in supply and demand may be small, but it can have a dramatic effect on the market and the bottom line, so it is best to plan ahead for those changes.