Home+Prices+Decline+Again+by+Regina

//**REMEMBER: DO NOT SUMMARIZE THE ARTICLE!!!**//

=TITLE OF EXTRACT:= Home Prices Decline Again

=SOURCE:= New York Times

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=DATE EXTRACT WAS WRITTEN:= January 31st 2012

=DATE CURRENT EVENT WAS WRITTEN:= February 21st 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= The market of houses in the US is start to wobble due to the declining prices. This is related to the supply and demand of the economic theory. As shown in the first diagram, there is an equilibrium point where the supply and the demand of houses meet, at price of p1 and quantity of Q1. Here, the single-family houses are sold at the equilibrium price. However, the price declines to p2 as shown in the second diagram. As the price bar goes down from p1 to p2, there is a gap between the supply curve and the demand curve. This gap, a quantity difference of Q3-Q2 is known as excess demand. The price is low, and there is an excessive demand from consumers who are willing and able to buy the house at such decreased price.

=VOCABULARY TERMS AND DEFINITIONS:=
 * Market: An actual or nominal place where forces of demand andsupply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods and services for money
 * Supply: The willingness and ability of producers to produce a quantity of a good or service at all prices in all time periods.
 * Real GDP(gross domestic product): A macroeconomic measure of the value of output economy adjusted for price changes (that is, inflation or deflation)
 * Interest rate: A rate which is charged or paid for the use of money
 * Foreclosure: The process of taking possession of a mortgaged property as a result of the mortgagor's failure to keep up mortgage payments.
 * Mortgage: The charging of real (or personal) property by a debtor to a creditor as security for a debt (esp. one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period.

=DIAGRAMS:=

=EVALUATION:= The price has decreased a lot from the equilibrium price, and there are a few things the producers can do, in order to get the market back to its equilibrium point. The first is that the producers can decrease demand, so that the demand curve can shift leftwards and will eliminate the excess demand from consumers. However, this process is difficult when it comes to houses, because house is one of the most important things human beings need to survive. Therefore, if the price increases families would try to find another smaller house with a cheaper price, and if the price decreases more families would want that specific kinds of house. Another thing producers can do is increase the supply of houses, so that the excess wants would be satisfied. This takes a lot of work by construction workers and a lot of time, because a house is not some goods that can be immediately created by a factory in a few seconds. However, homeowners around the country can rent more houses to others, so that the buyers' excess demand would be decreased. This way, the supply curve would increase and move rightwards, moving the equilibrium point. Another solution to this country-wide problem is to increase the price itself. The article states "Housing has played a dominant role in the country’s economic sluggishness, as homeowners have struggled with foreclosures or mortgage burdens that far exceed the values of their homes. Hundreds of thousands of construction workers and other real estate-related employees have been thrown out of work and are still struggling to cobble together incomes." It seems that there are problems to homeowners, construction workers and real estate employees. They can fix such issues so that the price can go closer to its original equilibrium. If the producers end up increasing the prices of houses, then the price bar that was at p2 would again go back to, or at least get closer to p1, and the supply and demand curve would stay the same, leading the market back to its original equilibrium.