Supply is the amount and type of real estate available for sale or rent at differing price levels in a given real estate market. Demand is the amount and type of real estate desired for purchase or rent in a given market at a given period of time.
Variables that influence supply:
- availability of skilled labor
- availability of construction loans and financing
- availability of land
- availability of materials
Variables that influence demand:
- Price of real estate
- Population numbers and household composition
- Income of consumers
- Availability of mortgage credit
- Consumer taste or preference
Typically an over-supply of homes or land in a given area will mean lower prices. If there is an under-supply of homes and land, then prices will usually rise.