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This is How The Real Estate Market Will Crash (2022)

We need to address this once for all. There is a way that the market will collapse, but I am telling that now (as far as the informations we have), this is not it. But since everyone is trying to crash the market, I will tell you how it would happen.

It's the Economy Market, Stupid (Part I)

No, I'm not calling you stupid. That's the notorious phrase said in the Bill Clinton 1994 campaign War Room. Everything is about the market, and it responds to two things, and two things only: Supply and Demand.

You see, the price of any kind of good and service, from money to space travel tickets, are controlled by the free forces of how many people are willing and have conditions to buy it, and how much companies can provide that, giving their costs and profit margin (considering we are not in North Korea, or Cuba, or any other centrally controlled government).

This is How You Do Groceries

When you go to the supermarket ready to do groceries, you have a bunch of conditions that you cannot change, but will have an impact on your decision: your salary, your rent/mortgage, all the other expenses you must have that are not in the supermarket (so you need to save money for them), how much money you are saving, etc. With that in mind, you will buy more or less itens in the supermarket according to their price: if they are more expensive, you won't buy 3 bottles of wine, you will buy just one. This is what we call the Demand Curve, and it is like this.

The demand curve shows that when, given certain conditions and those conditions are constant (we called ceteris paribus), as the Price of a good or service goes down, the Quantity consumed goes up, and vice versa. That's one side of the equation. The other one is the supply.

You Are Not Important

The same way we decide how much to buy of something base on the conditions we have and the price of that something, companies decide to produce (offer) their goods and services based on their conditions (costs, labor, interest rates, taxes, incentives...) and the price people are willing to pay for it.

If, given certain conditions, the company can sell for more, which would increase their bottom line (a.k.a Profit), they will be incentives to increase the supply. If people are willing to pay less, less companies will be in the market and the prices will go up.

We see that happening with airline companies all the time. When a company buys another one, the prices of fly tickets go up, because they reduce the number of flights available, the supply.

So, the Supply Curve has a different shape of the Demand Curve, looking like this.

On the Supply side, given the conditions, the higher the price, the more companies will offer of a given product and service.

It's the Economy Market, Stupid (Part II)

Unfortunately, despite what my mom told us, in the Economy Market we are not special, and companies don't set their price base on individuals, but on the whole bunch. Consumers are not the weaker part of the equation, though, because if one company sells the same product as the other for a higher price, we go the the cheaper one (considering they are equal).

So, when we overlap the Supply Curve with the Demand Curve, we find the miracle of "Market Price", which is the price that puts the market in balance, just like this.