demand and supply vs rate cut + banked owned homes

**sac25274** · 02-12-2008, 10:47 AM

Hey folks, I don't know much about the real estate industry but there's something I need to ask. I noticed there are so many homes being built, but those numbers exceeds the number of buyers in the real estate market. According to the law of demand and supply, if there are more supplies that demand, then a house would lose its value or be worth less. But since the Fed has cut rates to half point, will the numbers of demand increase or will other factors discourage consumers from buying? If more buyers decided to step into the market, when should one expect to see an uprising trend?

What about the numbers of bank-owned homes? Will this number increase or drop in anytime soon? Don't this factor have any effect on the market? Your opinions would be appreciate. Thank you.

**blueshines** · 02-13-2008, 05:08 PM

Steve,

This is all just my opinion, but I hope it helps.

Mortgage companies are losing business and closing their doors. Real Estate builders are not able to sell their homes because many people can no longer qualify for loans to buy without high credit scores, assets , and solid income. This should have been the case from the beginning, but it was not and thats why we are in the state that we are in now.

Banks will be foreclosing on more properties and home values will continue to fall. (Because of supply and demand laws) This is really a great buying opportunity that I've been taking full advantage of.

I'm thinking that you'll see the market continue to slump until late 2009. Perhaps some increases in 2010. Remember that the next 2 years are going to make more real estate millionaires than ever before.

**nancyarora2020** · 03-05-2008, 10:16 PM

Prices and quantities in housing markets are determined by the interaction of the construction sector (the supply side) with households (the demand side). Key variables governing the supply of new housing include prices, the costs of construction materials and land, the cost of financing, and the amount of undepreciated housing stock. Similarly, key variables governing the quantity of housing include prices, the level of mortgage rates, expectations of permanent income or wealth, rates of return on other investments, and demographic factors that influence the decision to buy a house.The big picture is that there's a lot of uncertainty -- nationally and in Arizona.Five factors affect consumer outlook: the credit crunch; foreclosures; gas prices; the housing market; and the labor market. Confidence is vital in the housing sector. If expectations for the future performance of the economy deteriorate and people become less optimistic about their own financial circumstances, they are tempted to curtail their search for a new home or delay entry into the owner-occupied sector.This question is not easily answered. Inflation is defined as an increase in price without an increase in production. If you follow the Keynesian Macroeconomic model for aggregate demand and aggregate supply then the simple answer to you question will depend on the aggregate demand or GDP of the country.There are many factors affecting the real estate sector.I have shared some of them in my blog-realtydigest