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Changes in real estate markets: housing

Part 1 of 2
Published on August 29, 2024   9 min

A selection of talks on Finance, Accounting & Economics

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0:00
Welcome back to Real Estate Economics. This is talk number 7 in our series and talk number 4 about Real Estate Markets. I'm John McDonald, Emeritus Professor at the University of Illinois, Chicago and Emeritus Professor of Real Estate at Roosevelt University. Today the topic is Change in Real Estate Markets. We're going to look at what are frankly some extreme cases of changes in real estate markets to see how real estate markets respond.
0:42
We're going to be looking at urban housing markets, office building markets, and hotel markets. We're using studies that I did and there are lots of others. But I like the ones that I did.
0:57
So, changes in urban housing markets. Just some basic facts about housing markets. First of all, housing is very durable. With proper care, it can last for decades, even 100 years. Housing however can be built pretty quickly, and so housing markets will behave quite differently depending on whether demand for that particular market increases or decreases. An increase in demand tends to increase housing prices, of course, but supply can be increased pretty quickly. May take a couple of years, but in the real estate world, that's pretty quick. So, on the demand side when it goes down, that lowers housing prices of course, a decline in demand, but supply responds very slowly because housing is very durable. Vacancies rise, fewer houses are occupied as demand goes down as prices fall but eventually houses are abandoned and torn down. But that can take a decade or even longer. So, let's take a look at some metro areas that are extreme examples of what I've been talking about.

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