Weak+Sales+in+Housing;+Price+Rises+by+mengxin

=TITLE OF EXTRACT:= Weak Sales In Housing; Prices Rise

=SOURCE:= http://www.nytimes.com/2012/03/24/business/economy/sales-of-new-homes-decline.html?ref=economy

=DATE EXTRACT WAS WRITTEN:= March 23, 2012

=DATE CURRENT EVENT WAS WRITTEN:= March 26, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= The sales on new homes in the US fell in February for the second consecutive month, so the demand for new homes have decreased. Even though the mild winter and three months of strong job growths increased the demand for house resales, it did not help with the new home market. Economists said that it would take a long time for the housing market to fully recover and go back to the equilibrium before. There were positive signs because the sales figures in December was the best sales pace in a year, which shows that the demand for housing is increasing. Due to the decrease in demand for houses, the quantity supplied has decreased to just 150,000 new homes in the US in January and February, the lowest since 1963. An important reason to the decrease in demand for the new housing market is that lenders accept less for a house than what is owed on the mortgage, so this is a substitute for people who want a place to live.

=VOCABULARY TERMS AND DEFINITIONS:= Demand – the desire to own something, the ability for it, and the willingness to pay for it Equilibrium – when supply curve meets demand curve Quantity supplied – the willingness and ability to produce a quantity of a good or service at a given price in a given time period Substitute – products that can replace each other

=DIAGRAMS:=

=EVALUATION:= The decrease in demand for new houses in the US has been caused by the decrease in price for their substitutes, pre-owned houses, and rented houses. These two are substitutes of new houses to consumers would rather consume the substitutes because they’re cheaper. However, this can be changed by changing the tastes and preferences of the houses, so by advertising the new houses, it would increase the demand of that. This could also be changed if the government chooses to subsidize the new-house market. This would mean that the government gives money to realty development companies to help raise the supply of new houses, which would ultimately decrease the price consumers have to pay, therefore, increasing the quantity demanded.