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    Why do housing prices vary from city to city?

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    Explain why housing prices vary from city to city. Clearly explain how supply and demand affect the prices of the homes.

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    Why is there such a large difference in house prices between the regions of the US?
    Differences in real rates of economic growth - much of the growth in output during the late 1990s and early years of the current decade has been concentrated in the south east regions of the US
    Unemployment rates and employment levels - unemployment in the South and South Western regions is close to or below full-employment. Employment levels are at record highs and this inevitably fuels total market demand for housing.
    Population drift (between and within regions) - net population movement out of regions experiencing below-average economic performance leads to a reduction in demand for housing.
    Land prices and development costs - clearly, land prices tend to be higher when the pressure of demand for the available land space is high.
    Wages in the construction sector - hourly average wages in construction businesses in London and the South east are substantially higher than in northern regions.
    Speculative demand for housing - the speculative demand for housing as a financial asset stimulates extra demand when prices are already strong.

    demand and supply for housing
    The determination of prices in local and regional housing markets is a classic example of microeconomics in action! We are seeing the interaction between buyer and seller with prices being offered and agreed before a final transaction is made. In this section we focus on the demand and supply side factors that determine the value of properties in a market.
    Each housing transaction in the UK depends on
    (a) The price that the seller is willing to agree for ...

    Solution Summary

    This posting explains how supply and demand affect the prices of the homes in approximately 1000 words.