If there are so many people who can’t afford housing, why does the cost continue to rise? Shouldn’t the cost fall because there isn’t a demand?
In: Economics
Cost will only fall if there is no-one that can afford the property. There is still a high enough demand for it among those that can afford it to keep the prices high.
There is still demand for housing in areas with large homeless populations. It may sound cold, but the homeless population isn’t typically comprised of persons who are actively in search of a home to purchase – think high rates of mental illness or youths who have lost their housing. Home prices are volatile and based on a lot of different factors, such as interest rates, the overall state of the economy (which in turn affects consumer confidence), government policies, and the available supply of homes.
There are tons of people who can afford those houses moving in all the time. That’s why the prices are going up. There are people who used to live there that now don’t make enough money.
The opposite is true. Homeless people want houses too, so if there is a large homeless population that is usually a sign of huge demand with no supply.
Demand in the way that it is used in economics is dependent on willing and ABLE buyers at current prices. This is not the same as how this word is used when speaking less formally. What you are probably thinking is more like “want” or “need”. Without the ability (financial/resource) to acquire your want or need, this is not translated to “demand” at current prices.
Most homeless have other factors that affect their ability to find housing, like drug addiction or mental illness. So those factors limit their ability to find a job, which then leads to homelessness.
They probably weren’t ever homeowners or in the market to buy a house. More like apartment dwellers. However they may have been homeowners who got addicted to drugs, but that has nothing to do with the amount of people wanting to buy a home. The homeless population has removed themselves from the supply and demand equation in the housing market.
There are always normal, working people moving into an area and moving out of an area. If there are more moving in, demand rises, and if there is more moving out, demand falls. But the homeless population is completely separate and does not affect that in the least.
Still supply and demand. Homeless tend to congregate in places with better weather or more favorable homeless laws. Austin made it legal to camp out almost anywhere. More people are moving to Austin though so house prices have been jumping rapidly. House prices do fall in areas where people have moved away. Detroit famously had some very cheap houses on the market.
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