If supply exceeds demand in the housing market, what typically occurs?

If supply exceeds demand in the housing market, what typically occurs?

• A. Prices go up
• B. Prices go down
• C. Prices stabilize
• D. Prices become unpredictable

Answer: (B)

When supply exceeds demand in the housing market, prices typically go down. This phenomenon occurs because an oversupply of housing means there are more homes available than there are buyers actively seeking to purchase them. To attract buyers, sellers may lower their prices, leading to a decrease in the overall market prices. As the competition among sellers increases and buyers have more options, it puts downward pressure on prices. In this context, it’s important to note that a balance between supply and demand normally results in stable prices, while an imbalance like an excess in supply often leads to falling prices, as sellers must adjust to market conditions to facilitate sales. This fundamental principle of economics highlights the inverse relationship between supply and demand and their impact on pricing in real estate.

When supply exceeds demand in the housing market, prices typically go down. This phenomenon occurs because an oversupply of housing means there are more homes available than there are buyers actively seeking to purchase them. To attract buyers, sellers may lower their prices, leading to a decrease in the overall market prices. As the competition among sellers increases and buyers have more options, it puts downward pressure on prices.

In this context, it’s important to note that a balance between supply and demand normally results in stable prices, while an imbalance like an excess in supply often leads to falling prices, as sellers must adjust to market conditions to facilitate sales. This fundamental principle of economics highlights the inverse relationship between supply and demand and their impact on pricing in real estate.