Market Saturation and Real Estate
Market saturation, in economic terms, is whenever a product`s volume in the marketplace has been maximized. When market saturation is reached, additional sales advancement can only be attained through improvements in the product, increases in share of the market at the expense of other suppliers or by a rise in the all round need. Quite a few companies are mindful of this and design products that need to be replaced frequently. Lots of individuals believe, for example, that present-day technology can produce a light bulb that would last in perpetuity but releasing this technology would slow up the need for light bulbs.
Some companies take care of market saturation by transforming their business design. For example, the market in the computer systems industry is becoming extremely competitive and somewhat unprofitable, and hardware companies are transferring their concentration to developing software programs and services features. Real estate markets are the same as any other markets and susceptible to the very same laws of demand and supply. Every real estate market experiences a cycle of feast and famine, and historical information shows that the cycle is seven years long from beginning to end.
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The cycle starts off with an increase in demand and when supply can`t meet it, selling prices begin to rise. As soon as demand and supply balance out, the appreciation quits and if supply overtakes need, price ranges begin to drop. The absorption zone is the period between decline and growth, and the saturation zone is the opposite, heading from growth to decrease. Fairly often the oversupply is due to builders who think that the great times will last forever. In the United States real estate markets over the last several years, there`s been a enormous inventory of real estate which will need to go before the saturation can be conquered. The image is further complicated by the influx of home foreclosures and REO properties available on the market .
This has different implications for different players on the real estate market. For example, if builders believe that there`s saturation in the condo markets, they`ll avoid building new condo properties which can be hard to sell. In the same manner, the sellers of condo properties must tone down their anticipations if they`ve got to effectively achieve a sale. However, if you`re an investor, this is the time to look for good buys unless you believe that prices are going to crash and burn even more.
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Posted in Real Estate Post Date 12/14/2015