TOPIC: An Examination Of The Housing Market

Topic: An Examination of the Housing Market

An Examination of the Housing Market

Introduction

Housing is, in general terms, a tangible structure where people live. It provides protection from the elements and supports basic physical human needs such as a place to eat and sleep. However, the importance of housing is broader than its physical functions. Housing also provides the space for family interaction—the basic building block from which society is formed. For humankind, housing is as basic a need as is water or food.

Housing, examined from a more complex approach, is a commodity with unique attributes and peculiarities. First, it is produced and consumed in the same location, essentially exhibiting spatial fixity—an attribute uncommon in other commodities. Unlike other consumptive goods, traditional housing is fixed in space and cannot be moved to another location. In other words, the production and consumption of housing depends on road networks that make it accessible to other areas. A housing unit is both a commodity and an investment. Housing as a consumptive good helps define the quality of life or socioeconomic standing of its consumer. Housing is generally the primary investment for many families and can transfer wealth in the form of inheritance to subsequent generations. In urban areas, the housing unit is the primary building block of neighborhoods.

Discussion

As with any other consumer goods, housing markets are the results of the interaction between seller and buyer. The demand for a housing market is based on the same characteristics that influence the demand for other goods—namely, employment, demographics, and income. The national level of employment is an indicator of income; when unemployment increases, housing purchases might decrease. The composition, distribution, and movement of the population are other factors that can influence demand in the housing market. Another important factor influencing the demand for housing is income. For example, high interest rates can slow down home acquisitions, while low interest rates may increase home acquisition, especially during an economic recession. At the same time, unemployment and lower income triggered by a severe recession may lead to a collapse of the housing market, especially when mortgage lenders withdraw from the market.

Besides the buyer, other agents in the housing market include landowners and developers as well as financial institutions and governmental institutions. However, mobility enables people to redefine the geographical limits of housing and labor markets. Thus, employers also play a role in the housing ...