ABSTRACT
Real estate markets may be peculiar and idiosyncratic in a number of respects, but they still obey the basic principles of demand and supply. This supply-demand framework provides a basic analytical approach for conceptualizing the workings of real estate markets. As one down-to-earth practitioner suggests, these simple principles have been ignored by the real estate industry in favor of boilerplate analysis or simple hunch and intuition (Featherstone, 1986). Hunch and intuition may be useful when they are based on a solid understanding of how markets generate opportunities and constraints. However, such an approach may be very misleading when it is based on a myopic interpretation of market conditions. This chapter first reviews the fundamental concepts of demand, supply, prices, and price adjustments, then expands on how they apply to real estate, and finally elaborates on their relevance to market analysis.
