valuation
supply and demand
Supply and demand is the economic principle that value tends to rise when demand exceeds supply and fall when supply exceeds demand. In real estate, supply responds slowly because building takes time, so prices can shift quickly with changes in population, employment, interest rates, and credit availability. Appraisers consider local supply and demand when estimating value.
- Exam tip
- Know the direction: more buyers and fewer homes means a seller's market with rising prices; more listings and fewer buyers means a buyer's market.
- Example
- A new factory brings 3,000 jobs to a small town with few homes for sale, and prices rise 12% in a year.
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Last verified: 2026-10-23