Microeconomics Essay Example | Topics and Well Written Essays - 500 words

Microeconomics - Essay Example This is especially true in the high-end home market where inventory is rising sharply and is beginning to experience falling prices. The resiliency of the real estate market and its reluctance to react to intuitive supply and demand pressures is a result of the seller's option to hold their property. The inelastic nature of the market is largely due to two factors. Typically long lead times for real estate inventory to affect prices and the ability of the seller to exercise discretion both contribute to the seemingly strange market condition. In the article, Bob Walters, chief economist for Quicken Loans, says, "People will hold their house on the market longer, rather than accept a lower price". This seller discretion indicates we may see further slowing of sales before prices begin to slip. However, warning signs of increased weakening are on the horizon. A Deerfield, IL. agent said that homes in the $1 million dollar range are beginning to feel the stagnation. He states that houses in this range have as much as a four year inventory and in some cases have seen a 50% drop in prices in the last few months. The increase in supply in this range has finally caught up with the number of sellers who need to find a buyer.