New house prices go up David Freeman,
the Leader- Post September 13, 2006
http://www.canada.com/reginaleaderpost/news/story.html?id=93a81211-5a82-4323-acf2-a2926fe32367&k=61203
Summary
The prices of houses in Saskatchewan continue to skyrocket causing many concerns. According to Statistics Canada, report shows that new houses in Regina rose by 9.3 percent in July. David Hepburn, the president of Saskatchewan Home Builder’s Association claims the shortage of construction materials and labour is responsible for the dramatic increase in prices. As wages are increasing, there are more demands for houses. The trades and suppliers are very busy, which affected prices greatly. Materials such as concrete, pipes, petroleum products and drywalls have all put pressure on the prices of new houses. With a shortage of labour in the 47 different trades involved in housing, the prices climb higher. Shipping cost of fuels and other limited supplies like trusses together just worsen the situation. Currently the truss suppliers and engineered floor system suppliers have a shortage of supply available and because they are up to their maximum capacity, they cannot produce more products. The pressure on sale of existing houses is also a factor affecting the prices of new houses. Also, due to the fact that there is a shortage in labour and supplies are scarce, it requires more time to complete the construction of a house, which costs builders and ultimately consumers more.
Relationship and Reflection
The article addresses the supply and demand concepts studied in this chapter. The article stated a number of factors that are affecting demand. As wages increases for consumers, the demand for houses goes up as well. This is an example of the factor, income affecting demand. Under most circumstances, the more money consumers have, the higher the demand for the products. This relationship does not apply to all products, but houses are one of the products that can be described by this relationship. Since the demand for houses is high and the supply is low, the prices will increase. As mentioned above, the shortage of labour, trades and suppliers affect prices because they are all scarce. The number of characteristics of consumers is another factor that plays a big role in the change of demand. As we all know, when population increases, the land available will not. This means houses built on these lands will be insufficient for this large increase in population. But with a high demand being present, prices will respond by accelearting. Also, the article described the pressure on sales of existing houses affects the prices of new houses. This is an example of change in price of substitute products. As we all know, old houses are always a good alternative to new houses. The change in complementary products prices such as constructions materials make house prices drive up as well. Houses may be considered inelastic at this moment, but if prices continues to increase, it will become more elastic because there are many other substitutes. However, this depends on whehter prices of houses exceed the prices of their substitutes.
Generally, the market does not have full control of the prices of products. It is based on the concepts of supply and demand. If there is a shortage of supply, then of course competition for these products will occur, which ultimately makes prices increase. So, in other words if you want the product, you must be able to compete for it using lots of money.
posted by wini_lao @ 12:21 AM
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