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There's not a whole lot of magic about supply and demand. If demand is high, a low supply will result in a high costs whereas a high supply will result in low costs. Because of the abundance of products in the marketplace, our economy is demand driven. Meaning, if demand is low, it really doesn't matter what supply is because the price will be low. Well, in our real estate market, demand is high. People are always inheriting properties, getting sick, getting divorced, gettind addicted to drugs, losing their job or getting transfered. All of these result in people wanting to either buy or sell a property. Given a good economy, the average homeowner moves once every seven years. This article at Bloomberg caught my attention because it clearly states that, on a national level, there is an over abundance of supply. "The top 14 homebuilders have seen their market value plunge 69 percent...since 2005." Ouch! Why so low? Supply and demand. After building and building, it resulted in over supply. The market is telling the homebuilders, "We don't need anymore new homes." While this is certainly true on a national scale, here in Austin, the effect is more minimal. If you were to drive around the periphery of Austin, you'd probably run into new subdivisions all the way around. There have been lots of new homes built in the last 2 - 3 years. Fortunately for us, though, we've had a very good job market that has attracted homebuyers and investors. But that doesn't mean all is dandy. As lenders restrict lending and as homebuilders build less, what we are facing is a simple supply and demand function at work. Demand will dip (though not much), and supply will go up. Add these together and you're looking at decreased home prices. How much and what areas will be affected the most is a bit too much to get into here. But it will happen. And that just further illustrates why now is the best time to start your education in how to invest in real estate. Opportunity is knocking. -Beasley
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