Week 2: CheckPoint - Industry Research Part I
Grade: 30/30
This was submitted as two attachments but is combined below
Article or Web site reference:
Brown, B. (2004, January 20). Home prices soar above incomes. USA
Today. Retrieved September 15, 2005, from Ebscohost database
Summary of Article or Web site:
Home Prices Soar Above Incomes, by Ben Brown, is an article that was
released in USA Today and discusses the implications of the housing
market bubble. Mr. Brown’s research has shown the housing
market is rising significantly faster than incomes, and as a result
middle class families will not be able, long term, to continue to
purchase middle class homes. Mr. Brown’s contention is that
as new homes are being built, it is important that affordability be
included as a value added benefit, or risk the loss of not only lower
income families, but also middle income families as well.
Article or Web site reference:
Baker, D. (2002). The run-up in home prices: A bubble.
Challenge 45(6). Retrieved on September 15, 2005, from Ebscohost
database
Summary of Article or Web site:
The Article, A Run Up in Home Prices: A Bubble, by Dean Baker, is
an interesting article that discusses the circumstances which have led
to a bubble in the US home markets. The article discusses the
likely implications of the housing market returning to a more properly
adjusted market, as well as discussing what the author feels are near
term implications of the housing bubble collapsing.
The price elasticity of demand
for the home market is considered to be elastic. Although, it is
important to note that many psychological factors contribute to its
elasticity, as homes overall are considered a valuable asset.
There are substitutes available in the form of rented places to live
such as apartments, condos, and homes owned by other individuals.
Housing, by nature, is a necessity, however, owning a home certainly is
a luxury.
The price elasticity of supply in the housing market is very dependent
upon the areas in which the houses are located. For example, in a
metropolitan area where land values are valued based on proximity to a
particular area of town, the cost will be basically inelastic.
There is a limited amount of space that is close to the metropolitan
area, and therefore, there will not be more supply. If a home is
located in a more rural area, with land in abundance to build more
homes, or where existing homes exist with room to expand, the housing
market can be very elastic, and supply can easily adjust to fit the
amount of demand.
© Erik Smith 2005
Licensed under the GNU
Free Documentation License