Buying at the Right Price - Principle of Supply and Demand

Posted on October 13, 2008 
Filed Under Buying Your New Home, Valerie Zinger

No matter the offering price that the home owner has chosen, the right price for you (the buyer) is what you are prepared to pay and the owner is prepared to accept.  How do you get to that price?  There are several principle of value that consciously or sub-consciously play in arriving at the price. Here is one of the Principles.

The Principle of Supply and Demand says that the value is likely to increase on a home if there are few homes available on the market and many buyers.  This is also known as having a Sellers’ Market - competition will exist to buy the home.  Conversely, if there are many homes and few buyers, the price is likely to be lower on that same home.  This is a Buyers’ Market.

What does this mean?  If you are looking at a new development and many houses have been built in anticipation of buyers but few buyers are looking, then the price is likely to be lower than if there were more buyers than houses available.  If everyone wants to move to the Glebe and only a few homes become available each year, then those homes are going to be eagerly sought and more valuable than if there were hundreds of homes available each year.

Market forces are always at work. 

Photo credit:  daytona housing development @ http://www.flickr.com/photos/ghostdad/2544951417/

Comments

Leave a Reply