FINC 475 Supply & Demand in a Real Estate Context (Due 9/16)

http://www.investopedia.com/articles/mortages-real-estate/11/factors-affecting-real-estate-market.asp#axzz26qIXeptl
This article lays out the main factors in the supply and demand in the real estate market. One of the key factors is the demographics of the area. The article puts a lot of stock into the demographics as a key factor, which I slightly disagree with. The article claims different demographics prefer different types of real estate. Further evidence for this point is found in this article about the real estate in College Station, TX.. It shows the demographics of the area for potential investors of real estate. Obviously this is pertinent information for investors. Thus, the demographics of a country can dictate the type of demand in real estate. One of the main factors in the supply and demand of real estate is interest rates. Interest rates dictate if a person is going to be able to have the money to purchase the real estate. When interest rates are low, there is a high demand for real estate. When interest rates are high, people do not want to take loans thus the real estate market goes down. The overall economy also dictates the supply and demand of real estate. When the average GDP is higher more people have money to invest. Government policies/subsidies can effect the supply of the real estate market. When a government gives out a subsidy it opens up more real estate and homes for people to buy.

The real estate market efficiency hypothesis contends with the idea that the price and value of real estate reflect all available information. This is a hot topic for debate, as many people believe the seller always has more information than the buyer. This article contends with the debate in the real estate market in Vancouver. The author claims there is data that goes against the efficient market hypothesis. The author claims that some purchases are based on irrational expectations for future returns. He claims there is deviations between the intrinsic and market values of properties, which would cause the efficient market hypothesis to not hold.