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

If both supply and demand are high, how will the values be affected?

1. Increase

2. Decrease

3. Remain Stable

4. Fluctuate

The correct answer is: Remain Stable

When both supply and demand are high, the values in the market tend to remain stable because the forces of supply and demand are balanced. High demand typically puts upward pressure on prices, as more buyers are competing for a limited number of properties. However, when supply is also high, there are many properties available for purchase, which can negate some of the upward pressure on prices. Essentially, the abundance of available inventory keeps prices from rising sharply, leading to a situation where property values stabilize rather than increase significantly. In a balanced market, where both forces are strong, the increased competition among buyers does not lead to a corresponding rise in prices due to the equally strong availability of properties for sale. This creates an equilibrium point where the values are consistent and do not exhibit drastic increase or decrease but rather remain steady. This understanding of market dynamics is crucial for real estate professionals when assessing property values and making informed decisions in a high supply and demand scenario.