Effects of Supply and Demand Essay

743 Words May 11th, 2013 3 Pages
The decision to purchase a new home is a major decision and should not be taken lightly. When using the term new home, we will consider new, site built homes. When one considers that this home will more than likely be the dwelling place for the buyer for the remainder of their life, it places even more significance on the decision. There are many things that should be considered and many things than can affect that decision before a final choice is made. One of the first considerations when deciding to purchase a new home is the cost and how that cost will affect the supply and demand for new homes. The higher the cost of new homes, the lower the demand for new homes will be. Factors that affect the cost would be the number of …show more content…
Other considerations that affect the supply and demand for new homes include the neighbor the property is located in. The closer the property is to jobs, schools, and shopping centers, the more the desirable the property and the higher a buyer would be inclined to pay. Since more buyers seek property in these neighborhoods, there would be a greater number of houses being supplied to meet these requirements. Substitutes that could affect the supply and demand for new homes would include used homes and manufactured homes. Used homes would offer the same features at a fraction of the cost as a site built home. The same could be said for manufactured homes. These homes are competitive in size and features and often come at a fraction of the cost of a new home. Like a new, site built home, each of these would be suitable for a single family dwelling and would serve the same purpose. Due to these substitutes, the prices of new homes would have to remain competitive. No one would pay $100,000 for a new home in a neighborhood no matter how desirable when they could purchase a used home for $26,000 with similar footage and features in the same neighborhood. Since the cost of the used home is lower, more people would be inclined to purchase the used home. Two compliments for a new home would include land other than that which the house sits on, and a mortgage. A house and land seem to go together, and most persons

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