Analysis of the article “Real Estate Principle”

In real estate market, economists closely monitor the trends in the economy in order to project the patterns of demand and supply. The article shows how the current change in economy trends of real estate market have affected various parties in the real estate market. Factors such as the cost, income, and price of housing greatly affect the demand of housing as seen in the article. Electricity supply also partly affects the supply of housing in the real estate market, as one of its inputs.

From the numerous forecasts, the economy has projected that the momentum of the economy in the second half of the year after July will go down. This will affect the real estate market in the area of housing due to many factors this paper has covered. Despite the economy losing its momentum, there has been a significant growth in various sectors.

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For instance, in the manufacturing sector the output seems to have increased in the production of electronics, business equipment, and automobiles in the United States of America. The disruption that occurred could have led to this in the East when tsunami and the earthquake greatly hit some parts of it causing destabilization of automobile production from the west hence increasing production from the United States of America (Barber, Floyd, & Floyd 311-320).

The industries also seem to have increased the use of their capacity signifying an increment in output. The author of the article points out that the previous anticipated slowdown of the economy would subside in due time and there would be minimal scares about the demand of the consumer surging. The sentiments of the consumer can however be falling due to the facts that there is a rather weak growth in the job area and economists predict low ability of the consumers to afford the housing.

The falling sentiments of the consumer have led the people to shift in selling their property. Part of the population is no longer investing in the construction of houses that cater for single family and those of multi-families and most of them are turning to either purchase of smaller units such as apartments or even going to rentals. The owners of the housing units that are not in demand will push the prices of the housing down in order to accommodate the consumers who have weak purchasing ability.

The article establishes that there are no signs of the real estate market improving in the near future and economists predict this on the fact that the permits that builders usually get for new constructions have actually declined. This has trickled down to dampening of spirits of the builders and rather low sentiments to start housing projects. However, it is not possible to conclude that all parts of America have experienced the decline.

The demand in the real estate market refers to the consumers desiring housing at a particular price and the supply in the real estate market refers to the housing units that the builders are willing to offer or are offering at a particular price. Further, equilibrium is the main point of focus in economics and in real estate market. It refers to the point of negotiation between the suppliers of housing and the consumers of the same units.

It also refers to the ability of the suppliers and the consumers to come to an agreement where the amount of units produced by the supplier are equal to the housing taken up by the consumers within a particular time and having in mind that all other factors remain constant (Barber, Floyd, & Floyd 321-328).

The increase in the output of the electric utilities makes suppliers bound to increase the output of housing they offer. When this happens, the price of the housing units will go down and this will make it easier for the consumers to access these facilities whenever they need them. On the other hand, the weak growth of employment is rendering so many consumers’ income to be very low.

This will reduce the consumers’ ability to purchase or take up the housing units and in this case the real estate market will experience a decline in the demand for housing and as the rule goes, the prices of the units will go down to make them affordable. This is a rather tricky situation in economy where the suppliers have favorable factors to boost their production. In addition, the consumers are unable to take up the housing when the price offered by the suppliers is high.

Investors in the real estate market can easily come up with a state that is close to equilibrium by lowering the prices of their output through building less expensive housing units. For the consumers, they can take up less expensive housing units by residing on the apartments or simply switching to rentals in order to favor each other to ensure the continuity of the real estate market in the economic decline (Barber, Osburn, & Floyd 331-354).

Works Cited

Barber, Russell, Osburn, Floyd and Floyd, Charles. Real Estate Principle (9th ed.). California: Delmar Learning, 2011. Print