Market_Equillibrium

Beginning with the concept of supply, the determinants would include resource prices, the number of sellers in the market, and prices of other goods (McConnell, Brue, & Flynn, 2009). In recent years we have witnessed the economy enter a very tough period. As a result there is a large surplus of available houses. “ Supply Assuming that there is four people per household, the U.S. currently has enough surplus housing to provide shelter for the entire populations of the United Kingdom and Israel combined (Crawshaw, 2009). Reasoning behind the surge in empty houses is a direct relation to the rapid growth of unemployment. As people lost jobs and companies began to close, homeowners were forces to foreclose or sell in search of a cheaper alternative. Sacrifices are made, in a effort to ensure that the necessities are obtainable. For example, individuals may leave a larger home for a smaller apartment where the rent is half the amount of a mortgage note. There has also been an increase in individuals returning to live with relatives because they cannot afford to live alone. Demand While the demand for houses is still low, it is beginning to see a slow growth. Determinants of demand include change in income, change in the number or buyers, and change in the prices of related goods (McConnell, Brue, & Flynn, 2009). The economy is has begun to show slight improvement in some areas. As individuals are finding new jobs and income is being restored, they are finding more opportunities to purchase homes. The interest rates for a mortgage as recently hit a record low. “These rates paired with low down payments and high approval rates, allowed many people to act at once, and helped generate large changes in the housing markets (Economist’s View). These developments allow us to see a change in the demand curve. Market Equilibrium For market equilibrium to exist the quantity demanded and the quantity supplied must be equal (McConnell, Brue, & Flynn). The chart below depicts the amount of homes that were in demand from 2005 to 2011. Reviewing the chart, created by Louis Basenese, shows how much the housing market has declined. However, as the chart flow reaches 2011, we begin to see a slight increase starting to take place. Sources Basenese, L. (2012, February). The Real Estate Market Just Hit Rock Bottom. Wall Street Daily, (), . Retrieved from http://www.wallstreetdaily.com/2012/02/09/the-real-estate-market-just-hit-rock-bottom Crawshaw, J. (2009, July). U.S. Housing Surplus Enough for Britain, Israel Combined.  . Retrieved from http://www.moneynews.com/Ecomony/housing-surplus/2009/07/27/id/331875 Economist's View. Retrieved from http://economistsview.typepad.com/economistsview/2010/08/can-interest-rates-explain-the-us-housing-boom-and-bust.html McConnell, Brue, & Flynn, (2009). Economics (18th ed.)