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Housing Consumption

Needs, patterns, as well as trends in the housing consumption in a changing and contemporary society, will significantly affect the real estate demands in future. Housing consumption will involve diverse issues that will influence consumers in the market, especially those who seek to provide consumable and shelter services for their households as well as themselves. The consumption of houses is influenced by affordability, appropriateness, level of income, as well as the availability of the housing stock.  In the private market, housing consumption is the ultimate outcome of housing expressed demands and is controlled by the demand and supply theory. Housing demand is responsive to the price of housing, distributions as well as levels of consumer income, tastes, and preferences, household composition, amount of other goods, as well as demographic influences. This paper, therefore, discusses how demand and supply will affect housing consumption by 2075.

Supply and demand play a critical role in the housing industry. A low supply causes a direct increase in prices. On the same note, an increase in demand increases the prices of housing (Piazzesi 532). On the other hand, an oversupply and or a weak economy lead to low housing demand, which in turn lower their prices. Borrowing costs or interest rates are some of the factors that influence the demand for housing. People are more likely to take more debts when the interest rates are low. As a result, they are able to finance the purchase of houses as the amount they have to pay as interests are not burdensome. If the number of buyers increases, demand increases. On the same note, if the supply of housing inventory is limited, people from a low-interest environment tend to buy even more. However, increase in demand can trigger production which in turn can lead to recession. For example, during the Great Recession, the demand of house increased which led to increase in supply. As a result the prices fell below the market values which caused a recession.

Drawing lessons from the Great Recession, as a real estate agent, it is more important focus on both supply and demand. While demand will trigger mass production in future, especially due to increase in populations, real estate will have to regulate supply. Consequently, producers should embrace different strategies from over producing such as allowing consumers to expand their existing rooms to incorporate their family. As a result, the construction of new home will decrease or remain constant (Piazzesi 532).  Therefore, demand and supply will affect consumption of housing. Besides, the confidence of the consumers will increase the demand for houses. The housing consumption and market, as well as the future of the economy in housing, will be determined by the people’s confidence on both the market and the producers. For example, the demand for houses will most likely rise faster in a booming market. Moreover, the consumption of housing will be affected by affordability.

In conclusion, housing consumption will encompass diversity of issues that will influence consumers. The consumption of houses, therefore, will be influenced by affordability, demand, and supply, level of income, as well as the availability of the housing stock. A low supply causes a direct increase in prices while an increase in demand increases the prices of housing.

 

Works Cited

Piazzesi, Monika, Martin Schneider, and Selale Tuzel. “Housing, consumption and asset pricing.” Journal of Financial Economics 83.3 (2007): 531-569.