Supply and Demand
University of Phoenix
XECO/212

When prospective homebuyers are looking to buy a new home in their area, they should consider the health their local real estate market is in. A prospective homebuyer needs to have an understanding of the many different economic trends a real estate market can have, There are many different business cycles and real estate trends that will have an affect on why a homebuyer would purchase a home and there are different monetary advantages depending on what kind of business cycle going on at the time. The major factor that has an influence on the price of housing is supply and demand of your local real estate.

The most basic economic principal on a products price is supply and demand, Supply and demand determines the price of products based on the availability products. If a products demand is high and the supply is low then the price will increase, because people are buying large quantites of the product and if supply is high and the demand is low, It’s probable that people are not buying the product at that time so the price will generally be lower than it would if people were buying a large amount of the product.

There will always be a need for homes because there will always be people that need them which makes homes inelastic. The terrorist attacks in September of 2001 created a substantial amount of uncertainty within our economy and spawned a consumer confidence crisis (CNN Money, 2001). The terrorist attacks created a domino effect within our economy which then caused a consumer confidence crisis which caused the Federal Reserve to lower interest rates further than they were on homes to make money more accessible to consumers. This increased consumers confidence. The lower interest rates helped people get loans to buy new homes and this cause the housing