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If 90% of the Buyers Go Away Will 90% Of Realtors Go Away As Well?

Supply and Demand | AP Aol Poll says real estate is in trouble 

Nearly 90% of consumers recently polled say they are not interested in buying a home any time soon.  A joint poll of the Associated Press and AOL indicated that the recovery of the housing sector will not be any time soon if the retail American consumer has anything to say about it.

60% of those polled stated that they were DEFINITELY not going to buy a home anytime soon while just 0ver 10% said they would be looking to purchase a new home in the near future.

You don’t have to be a mathematical genius to see that there is a tremendous amount of inventory available for a very slim and decreasing demand. If supply and demand ideology is true, then it is safe to say that there are going to be an overwhelmingly increasing number of unsold homes.

Since unsold homes equates to unearned commissions, what are the majority of real estate agents going to do? Earlier this year, we wrote what was viewed as an inflammatory article announcing the NAR Going Out Of Business Sale. Doesn’t sound too far fetched anymore does it?

Don’t Believe It’s A Going Out Of Business Sale…Then Somebody’s Lying To You!

While this news of prospective buyers not wanting to purchase any homes is somewhat disconcerting, it’s not the main reason to be alarmed. It’s merely a by product of a continued misunderstanding of the simple economic precept of supply and demand.

Many current home sellers do not understand it, and many listing agents do not understand it. It is my opinion that if this theory was more understood and accepted, then it is possible that the housing market would not be in the state that it is.

The Laws of Supply and Demand represent the cornerstone of economics and these laws are the basis for a free market economy. DEMAND is based upon how many buyers are interested in acquiring a certain product or service AND how much of that service or product they are interested in consuming. The latter part of that statement is often overlooked.

When planning to bring a product or service to market it is prudent to have a good understanding on not only the consumer’s desire for a product, but also knowing how much of that product the consumer is willing to…well consume.

When you go to a movie, you come to the theater and take a seat and wait for the film to begin. As you sit with your popcorn and soda, you see the room begin to fill up. The theater owner knows there is a certain part of the neighborhood that will be interested in a certain film, what is harder to forecast is how many of those in the neighborhood are actually willing to purchase a ticket at that particular time and in the near future to see THAT particular film.

In real estate, with a tremendous amount of inventory, there are less and less buyers willing to even purchase a home and the Realtor working in that particular market can not determine which home any prospective buyer will purchase at any particular price at any given time. The irrefutable laws of supply and demand are working negatively on the pricing of inventory in the real estate industry.

While certainly there are SOME buyers out there looking for homes in any given market, and that is a given, what has now been determined by the latest AP/AOL poll is that the market of available buyers willing to consume at the present time and foreseeable future has dwindled considerably.

The “law of demand” is important for those in the real estate industry to understand. This basis of enterprise states that the higher the retail or asking price of a good, the less consumers will DEMAND that product or service. In black and white this is an undeniable fact, point blank…the higher the price, the lower the quantity of the demand. Add in to the mix a perceived decline in value and you have a recipe for economic disaster.

In the present real estate market, there exists a declining consumer base willing to purchase any home, at any price at any time in the foreseeable future, while you have an incredible, growing supply of product flooding the market and FURTHER influencing prices downwards.

In is incomprehensible how any seller or any agent can be utilizing the obsolete CMA or comparable system of pricing homes on the market right now. Real estate seems to be one of the only businesses wherein price is not determined by an accurate and intelligent assessment of supply and demand. Why?

Real estate professionals are either not understanding the proven laws of supply and demand or are seeking to ignore them. The former is remedied by an actual study of economics and business, the latter spells certain supplantation for those unlearned.

Maybe the NAR should have saved the $40 Million it spent on the “Great Time To Buy Campaign” which was DOA when it was unveiled. While I agree it is indeed a great time to buy, the message was futile and lost. It should have been the “Great Time To Buy At A Price People Are Willing To Pay – No Such Thing As A Low Ball Offer – No Offer Refused Campaign”, maybe that campaign would have had some legs.

I am sure there are some top producing agents out there that will indeed weather this storm, but if approximately 90% of the consumers WILL NOT be buying a home in the foreseeable future, is the Great Realtor Famine upon us?

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