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What's supply & demand for mortgage company or loans? |
What's supply & demand for mortgage company or loans? Specific to mortgages, it refers to the equilibrium or balance price between both supply & demand. Theoretically, the economic laws of supply & demand don't work as well in non-free market areas such as the mortgage market. Since a large majority of interest rates are determined by the Federal Reserve, the scale is offset. In basic macro-economics, a supplier is willing to supply more at higher price points (in this case profit margins) and demand is less. On the reverse side, aggregate demand is higher for lower price points. Source(s): Bachelors degree in Real Estate & Urban Land Development Minor in Economics Well right now, there's a ton of supply, AND a ton of demand. Therefore, its not a true balance. Interest rates are going up, so there's a demand for refinances. Because so many people are refinancing, theres more need for more mortgage brokers, so that increases the supply. unfortunately, lots of brokers are putting people in Option Arm loans, which have defferred interest, and in about 5 years, LOTS of people will be losing their homes, and there will be no demand for mortgage companys, and you'll see lots of small shops closing their doors. The law of supply and demand is the same in the real estate world as it is for the rest of the world. Over the last couple of years, when interest rates were at their lowest, people wanted to buy homes like crazy. There were more buyers than sellers. Sellers were getting their asking price and buyers were financing 100%. This triggered a boom in new home construction as well. Now with prime rate on the rise, the market is changing. There are more sellers than buyers. (There are 30 homes for sale in my neighborhood now.) The people that are buying have WAY more supply to choose from and are negotiating to the lowest price because buyers are now few and far between and sellers want to sell. I am seeing more neighborhoods that stopped new construction before the community was finished because there are no more buyers and the builders are out of money. New home sales are down for the last 2 months. This is the first time they have been down consecutively in the last 6 years. Builders are offering MASSIVE rebates (Some up to $50,000 off!) if you buy from them. This is Supply an demand in a nutshell... hope it helps. |
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