"I was going to buy a house to live in...and I have the money...but because there is no supply I am now homeless living on the street."
...said no one ever...
In discussions about the housing market, supply is often cited as the main reason a housing crash isn't on the horizon.
But this focus on supply alone misses the mark.
The real key lies in the balance of supply and demand.
And more importantly, it's crucial to understand what drives demand: affordability.
Understanding the Balance: Supply and Demand
Let's break it down with a simple scenario:
If you can afford a $250,000 house and the market is flooded with homes priced at $200,000, supply is indeed a crucial factor.
However, if all available houses are priced at $350,000, supply becomes irrelevant because those homes are out of your reach.
This is where demand—driven by affordability—comes into play.
What Affects Affordability?
- House Prices: Currently, house prices are at an all-time high.
- Jobs/Income: While...
