by David Berger
One often hears that the laws of supply and demand do not apply to housing markets. I may be biased--I am an economist by trade--but I believe that nothing could be farther from the truth.
What is the supply and demand framework?
At its core, it is way of understanding how buyers and sellers interact in a market. If the price of a good is high, people are willing to supply more of that good (if they can), while buyers demand less of it. We can use the framework to understand how prices will adjust when demand and supply change. If more people want to purchase something (demand increases), or it if becomes more expensive to make more of something (supply decreases), we would expect prices to rise. This immediately gives us two possible reasons why housing might be expensive: many people want to purchase it (high demand) or there are not enough homes for sale (low supply).
Do you have any data to back this up?
Yes. C…
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