Real estate market supply issues addresses the fact that in America supply of low to mid-range housing continues to lag behind demand, and will do so until prices rise. The demand for the properties are high however the supply is not being reach and this is due to the fact that home owners can get such high loans. Especially in neighbour hoods which have been affected by foreclosure, the houses have gone under water and this happened during the downturn. Another problem is that buyers now believe they can demand the closing costs which can be a bad financial decision for home owners to put their house on the market as they will not get the full costs. The real estate market is destined to remain soft as many Americans are in debt and would rather let their credit cards erupt with late payments.

'Explain what you think is happening to the equilibrium quantity and price and what it means for signalling, incentives, and resource allocation.' If you would graph out this situation you would see that the supply curve shifts to the left. At this point there would be an increase of scarcity because there would be less houses to sell to match up the demand. In this example it can be assumed that producers would have incentive to produce more because the prices of the houses would therefore increase. If the demand is staying the same and the houses are become more expensive then the producers will be willing to produce more. However consumers may no longer be able to buy property anymore so may look for other substitutes including renting apartments or moving into a mobile home. More resources will be allocated to produces houses.

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