Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

High supply and low demand generally lead to which market condition?

1. Stable prices

2. Increasing prices

3. Decreasing prices

4. Inflated prices

The correct answer is: Decreasing prices

High supply and low demand create conditions where the quantity of goods or services available exceeds the desire for those goods or services. In the context of real estate, when there is an excess of available properties compared to the number of buyers interested in purchasing them, sellers may need to lower prices to attract buyers. This often results in a decrease in property prices as sellers compete to make their listings more appealing. In contrast, stable prices would suggest a balance between supply and demand, while increasing or inflated prices indicate strong demand or limited supply. Therefore, the correct answer reflects the typical market reaction to high supply combined with low demand.