Economic analysis of the current residential housing market in Houston Essay

Economic analysis of the current residential housing market in Houston - Essay Example Houston realtor’s housing data indicates that demand for houses increased by 29% as January 2013 representing a sales increase of 4680 units as compared to the previous year. Additionally, the housing prices were ranging from $500,000 on January 2012 to million dollars. For instance, the highest price were recorded on January 2012 was $200296 (Bivins, paras7-8). The data further indicates that prices of single family houses increased by 9.6% between 2012 and 2013. This indicates that there was a 22.45% increase in housing prices this year as compared to the last year. Additionally, the sale of condominiums was reported to be 422 residential units as at February this year while on February last year the sales of condominiums was 313 units. This indicates that there was an increase in demand for condominiums and mansions by 109 units as at February 2013. According to Eaton, Paras 2-4, higher demand for houses caused an increase in demand for mortgages. For example, demand for mortgage loans increased from 11.4% on January 2009 to 18.6% on January 2011.Therefore, study aims to explain three factors that increase or decrease demands for residential housing in Houston as well as those factors that increase or decrease supply of residential housing. In above connection, the study will put forth demand three examples that explain areas where demand or supply based market failure can be anticipated. Additionally, the study will put forth three examples that explain demand or supply based market failures and how the government can address such failures in a free market. Connectively, graphs will utilize to explain the concepts that are going to be discussed. Economic analysis of the current residential housing market in Houst on Numerous factors have been attributed to an increases demand for housing in Houston, among those factors includes: change in consumer’s disposable income, change in demographic, availability of substitutes to mention just but a few (Arnold p.65). Changes in consumer’s disposable income may involve increase or a decrease in income. Whereby, an increase income caused an increase in demand for houses in Houston as many consumers could afford to pay for houses despite having a higher price. This in turn caused a movement from point A to point B causing a right ward shift demand curve from D1D1 to D2D2 as indicated in 1.1. Additionally, change in population demographics such; as increase in population, could have contributed to an increase in demand for houses (Gwartney p.61). Whereby, as birth rates increases, demand for houses increase causing a rightward shift in demand curve as indicated in diagram 1.1. In above connection, availability of houses that could have been used as substitute contributed significantly to a high demand of houses in Houston. This means that better houses were readily available and therefore, most people were able to substitute their old houses with a new and better residential house depending on their needs. On the other hand, those factors that decrease demand for housing include: changes in consumers future expectations. Whereby, future anticipations that houses prices might fall in the future they may make consumers postpone their current demand for houses in order to purchases those houses in the future at a lower price (Hall p.60). This in turn leads to a decrease in demand for houses and hence causing a leftward shift in demand curve as indicated in diagram 1.2 at the end of the essay. Additionally, a fall in consumer’