The Unpublished Problem With the Real Estate Market
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by: Random
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The hyped reasons for the massive slow down in the real estate market are the credit crunch and bursting of the real estate balloon. There is one other major problem that nobody talks about. At its core, the real estate market is no different from any other product based market. While we think of homes as part of our lives, they are actually just product units in the eyes of the law. As with any product, the issue of supply and demand has a lot to do with prices. Let's consider a simple example. Video games are immensely popular. The Wii is so popular that they can't keep them on the shelves. Simply put, there is a limited supply and a massive demand. This has resulted in stores selling the gaming system for as much as twice the suggest list price. The real estate market currently has the exact opposite problem. Whereas supply was limited in the early years of this decade, the game has changed. Recent analysis of the industry has revealed a glut of new homes on the market. There are approximately 450,000 new homes unsold. This equates to roughly a 10 month supply of homes meaning that if no homes were built for the next 10 months, there would still be homes to be sold. There are many factors that are keeping the real estate market in the dull drums. While financing is always an issue to consider, the sheer glut of homes available is a huge problem. It means that supply is far outweighing demand, which is resulting in the lowering of prices for homes. When watching the real estate market, most people look of indicators regarding when things will turn around. Media gurus discuss interest rates, the credit crunch, foreclosure rates and so on. In truth, none of these are indicators of a turn around. The crystal ball is simply the supply and demand. Watch the home inventory figures. When you see them starting to drop, you should take it as a sign the market is about to turn around. Raynor James writes about issues surrounding homes for sale by owner for FSBOAmerica.org where you can list your land for sale by owner for free for 1 month. |
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