Question

What are the determinants of housing demand? Do you really believe that there is a shortage (Demand exceeds supply) of houses in the real estate market? Justify your response.

Answer 1

Growing wages mean that individuals can continue to spend more on housing. Demand for houses continues to increase during times of economic development. Demand for accommodation still appears to be a luxury commodity. Thus, a spike in sales allows production to grow by a higher amount. The market for houses relies on the confidence of customers. It depends, in turn, on people's trust in the future of the economy and the housing market. If people expect prices to grow, demand will grow in order for consumers to profit from increasing income. In a bubble, housing demand increases faster than wages.

A very significant factor. It is not only the number of persons, but the shifts in demography. For example, a rising number of single individuals living alone has contributed to a growing demand for housing.

The need for housing not only relies on the population, but also on a household's average size. A growth in the number of households (faster than the population increase) is caused by some social and demographic variables. These shifts in populations include concerns such as:Increased life expectancy, leading to divorce rates for more unmarried elderly persons, increasing the percentage of single-parent households.

The U.S. housing market is running out of gasoline, which has become a bright spot in the pandemic-battered economy. The availability of homes to purchase is scarce, with consumers keen to take advantage of low mortgage rates. That is driving rates up and threatening to disrupt the boom by putting more Americans out of control of homeownership.

The massive demand for homes is an incentive for homebuilders to crank up construction and overcome the inventory crunch. Instead, as they struggle with supply shortages, increasing timber prices and heavy competition for labour and land, others are purposely slowing it down.