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Posted on June 16th, 2012, by

Traditionally housing prices vary greatly and there are many examples, which support this statement. For instance, if one searches for a 3-bedroom, 2-bath house, the individual would be probably surprised to what extent the prices differ. Basically they differ depending on the region, for instance, in California, namely in San Francisco, a 3-bedroom, 2-bath house may cost from 699,000 dollars to over a million dollars and such prices may be treated as quite high especially as compared to prices in other cities, for instance in Seattle, Washington, where they reach approximately 40,000 dollars or in Topeka, Kansas, where the prices vary from 21,000 dollars up to 30,000 dollars and even more.

Naturally such a situation provokes many questions as for the reasons why the prices vary so significantly in different regions and even in one and the same region. At this respect there is no unique answer since there are several reasons for such a price diversity. First of all, it should be said that a great role plays the demand, which is in fact the moving force for prices either to hit the top or to fall dramatically. It means that housing prices depends on the quantity of people who desires to live in this or that region and the more is the demand the higher the prices will be.

Not less important role should be given to the supply. It is obvious that if the demand is high it cannot be satisfied if there is not sufficient supply. Practically it means that not a house can be sold if there is no house at all. This is why if the demand is growing than it is necessary to build new houses in order to provide the sufficient supply and the wider gap between demand and supply is the higher prices will be.

Applying all these considerations to the housing prices mentioned at the beginning of the paper it may be said that obviously the demand on houses in San Francisco much higher as compared to the prices in Topeka and Seattle and in all probability the supply is insufficient and cannot satisfy the demand that grows.

However, on a deeper consideration it comes to the mind that the gap between demand and supply is not the only factor that causes such a diversity of prices. Naturally there should be some more reasons that provoke the growth of demand and naturally there are some conditions that do not permit to provide sufficient quantity of houses for all potential buyers. Among such factors may be named natural conditions, possibility of employment, living standards, access to educational establishments and other services, and so on. In fact some of these reasons may provoke the diversity of prices even within one and the same region.

Thus, taking into account all above mentioned, it is possible to conclude that the main factors influencing housing prices is supply demand correlation, which is engendered by a number of other factors of social, economic or even political character.

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