Demand In Manhattan Summary

The article was about the rise of average home prices in Manhattan. It was reported that the rise in price was resulted by three factors: stronger economy in the U.S, continued demand for housing, and slow growth in supply or low inventory level. There is a slow growth of supply because some sellers were just hesitant to sell their property since they are often outbid, turned down for loans or they just could not find what they want. With the new developments in the market, not only the locals but also international buyers, particularly Chinese investors, would have a greater demand for housing. The new housing developers saw the opportunity of this continuous demand for new housing. Triggered by these positive responds, the developers tried …show more content…
The improvements that have been made attracted people to own these properties, and hence increases the demand for them. This causes the demand curve of housing to shift to the right. The price of housing was further affected by the slow growth in the inventory of the resale units. As a result, the supply curve shifts to the left and the demand becomes greater than the supply of these properties. This leads to a shortage in the market for housing in Manhattan. Shortage is a situation when the quantity demanded of a good is greater than the quantity supplied of a good. In this situation, the buyers will bid up the prices of the goods in order to obtain the goods in short supply. As the price goes up, some buyers will quit trying because they don’t want to or they cannot pay the higher price. Therefore this result supported the law of demand that states that there is an inverse relationship between the price of a good and the demand of a good; as the price of a good increases, the demand of the good will decrease. With this condition, the rising home price have also contributed to a drop in sales. With the continuous growth in demand, the market will try to find a new higher equilibrium price. Equilibrium price is the price at which the quantity of a supplied of a product is equal to the quantity demanded of …show more content…
However, if the number of foreign investors in Manhattan keep on increasing, it may give a negative impact to the U.S since they (foreigners) will be the ones who will determine the market price of these properties. If the price continues to rise, there might be a chance of generating a bubble price (a situation where prices rise above their true value and will continue to do so until prices go down and the bubble bursts). I think this is why the creation of a stable equilibrium price of houses has not yet been established since the price will continue to move up in line with the demand and with more Chinese investors entering the states. The article also states that there was also an increase in the supply of new houses with greater amenities, however, why was there still a shortage? In other words, why is the demand still greater than the supply? In order to answer these two questions, I did some research about the housing in Manhattan. According to the research that was conducted by The Corcoran Group (2015), it turns out that the huge increase in housing prices do not occur in every segment of the housing market, instead, it occurs only in the housing sector that cost under US$ 2M. Based on the graph below, the sales of housing that cost from $100K to $2MM is greater than the inventory. On the contrary, the inventory that costs above