Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
This demonstrates the economic theory that the supply relationship is a factor of time. Suppliers do not always react quickly to a change in demand or price, but eventually they must. The article suggests that demand will decline 3.5% next year, but that median home prices will still increase by 5%.
Suppliers are beginning to react to falling demand through a decline in price increases and incentives which are really indirect price decreases. That's why this is referred to as a "cooling off" period in the article which mentions that some condo buyers are being offered a car to make a purchase of a condo. The use of incentives may be viewed by the suppliers as a way to mask the fact that prices are falling. They are trying to hide the fact that market power has switched away from sellers to buyers. This change in power will only motivate potential buyers to negotiate a price that is far lower than the published price. And, suppliers may be hoping that demand will pick up. If it does, it's easier to take away the incentives than to adjust prices.
Buyers expect that prices will fall further as demand decreases. Therefore, according to the article, they are now delaying their purchases or at least avoiding over-priced...
As a result, we're seeing sharp falls in the quantity demanded in over heated areas such as the West Coast where home-purchase contracts were down 14% in October, 2005. Demand isn't falling as much in other areas where housing appreciation hasn't been as astronomical.
The Wall Street Journal article does not discuss when or if housing prices will actually begin meaningful decreases, but economic theory suggest that the market will move towards equilibrium, a point when supply and demand are equal. How long this will take is the $20 million question, leading to debates over whether there will be an eventual housing crash or a more gradual market adjustment and speculation about how specific regional markets will fare.
Bibliography
Arnold, Roger A. (2005) / Economics, 7th Edition; South-Western Publishing.
Hagerty, J.R. And Simon, R. (2005, November 15). Housing market shows further signs of cooling. Wall Street Journal. Retrieved from Web site: http://www.realestatejournal.com/buysell/markettrends/20051115-hagerty.html
Housing demand is elastic. (2006, March, 8)
http://www.affordablehousinginstitute.org/blogs/us/2006/03/housing_demand.html
Bibliography
Arnold, Roger A. (2005) / Economics, 7th Edition; South-Western Publishing.
Hagerty, J.R. And Simon, R. (2005, November 15). Housing market shows further signs of cooling. Wall Street Journal. Retrieved from Web site: http://www.realestatejournal.com/buysell/markettrends/20051115-hagerty.html
Housing demand is elastic. (2006, March, 8)
http://www.affordablehousinginstitute.org/blogs/us/2006/03/housing_demand.html
Economic Globalization Has the 2008 financial meltdown in the U.S. And the ongoing economic crisis in Europe have practically ended the era of economic globalization? Following the financial crisis that marred the U.S. economy along with other global economies as well as the ongoing Eurozone debt crisis, there have been projected concerns that this predicament would end economic globalization. The purpose of this paper is to assess this claim. Going by Immanuel
Economic Crisis Policies US current economic crisis is considered to be started from real estate sector. The real sector started to decline in 2006 and it accelerated in 2007 and 2008. Housing prices have fallen from the peak from about 25% so far. The decline in prices left homeowners with no option and they were unable to refinance their mortgages and causes default of mortgages. This default of mortgages and loans
Economic Policy and the National Debt Ironically, when governments overspend they typically find ways to refund or restructure debt -- when individuals or corporations within those countries do the same, the consequences are quite different. Money means more than one thing -- usually an object that is traded for payment of goods or services, of exchange. However, when we talk about the government, there is a huge different in the way
Sorkin's book does a good job of giving the details on what happened among Lehman Brothers, Barclays, JP Morgan, Goldman Sachs, the Fed, and Big Gov following the collapse. Essentially, everyone had egg on his face -- but some of the bigger powers had the muscle to save face -- and sink competitors at the same time: which is exactly what Goldman Sachs did to Lehman. Goldman had been placing
Economic crash can be viewed from a number of perspectives ranging from causes and effects to the 2008 Crash's resemblance to the Crash of 1929, which began the Great Depression. This paper will consider the 2008 recession from the standpoint of the financial banking industry, which, according to economic journalists like Matt Taibbi (2010), played a major and significant role in the crumbling of the nation's economy -- just like
Economic Indicators The change in the United States Real Gross Domestic Product (GDP) ratings has shown both ups and downs in the U.S. economy over the last two years. In the most recent quarter, the first quarter of 2011, the U.S. GDP increased over 2%. While the GDP has increased every quarter since mid-2009, the quarterly increase in each of the last four reported periods was weaker than the quarterly increase