The Alabama News Centre website published an item titled "Huntsville House Sales Climb to New High for June" on August 2, 2017. The purpose of this article was to identify and discuss changes in the pattern of home sales and purchases in the Huntsville neighborhood in the Southern US state of Alabama that occurred during the month of June. The article, which serves as the primary source of material for this research study, also investigates the factors that influenced the sale and purchase of properties in Huntsville, Alabama in June of 2017. Among the various economic concepts discussed in the essay are demand, price, inflation, supply, manufacturing costs, and aggregate supply/demand. The major concerns of the article include the reigning market prices of the housing units in the Huntsville – Madison County area as well as the demand for these housing units in relation to the purchasing power of the consumers (mainly families). Additionally, Davis (2017) in the article, also takes a look at macroeconomic issues of monetary policy, interest rates and inflation.
Demand for Housing Units in Madison County & Huntsville
In June of 2016, the number of single housing units that were sold in the larger Huntsville and Madison County area in the state of Alabama stood at 688 (Davis, 2017). This figure would rise by eight percentage points which is about 56 units to stand at 744 units in June of 2017. In comparison to the month of May, this figure reflected a leap of about ten percent in the appetite for housing units in the area. A myriad of factors could have been the reason for the increase in the demand for housing units witnessed in June; among these may be an increase in the income earned by consumers in the area which would, going by the opinion of Baumol & Blinder (2015), have resulted in an increase in their appetites, willingness and subsequent ability to purchase the housing units. In this regard, as Davis (2017) supposes, the consumer spending that is often the biggest determinant of economic growth could have grown.
The growth of demand for housing could also have been a result of easy access to loans and mortgages to help finance the acquisition of such units; resulting from lower rates of accessing credit and hence boosting the willingness and ability of the consumers to acquire the housing units, as Dell'Ariccia, Igan, & Laeven (2012, p. 369) do point out. In the month being studies, Davis (2017) takes note of the fact that nearly three quarters of all the housing units sold were single-family houses; probably a testament to the assumption that the population of the single family household increased during the month of June hence necessitating the upward shift in demand for such units. Essentially, it is the demographic of single family households that drove the increased appetite for housing units in the Madison County – Huntsville area. Seasonal buying patterns, as Davis (2017) puts it, could also have contributed for the growth in demand for housing units in the larger Madison County area. Such a fact would resonate with the view of Gowrisankaran & Rysman (2012, p. 1185) who note that seasonal changes may also lead to a shift in the quantity demanded of a commodity.
Effect of the Trend on the US Economy
In the US, the economy is largely driven by the consumer appetite for credit which seems to fuel aggregate demand and subsequent consumption. With this in mind, it is therefore possible to link the increased uptake of housing units in the state of Alabama with economic growth. This is because such demand for the housing units could be a tell-tale sign of lower credit costs and hence greater consumer purchasing power which would trickle down, through the multiplier effect, to other sectors of the economy and hence fuel economic expansion. This demand for housing could also affect the economy of the United States by encouraging (if it is not regulated by relevant concerned authorities) the mushrooming of sub-prime lending which was one of the largest contributors of the credit crunch and near-collapse of the markets in 2008-2009 that resulted, as Ingham, Coutts & Konzelmann (2016, p. 113) insist, largely from the bursting of the housing bubble.
Conclusion
Drawing from the article by Davis (2017), the demand for houses, especially single family units increased in the greater Huntsville – Madison County area of the state of Alabama due to a number of factors including but not limited to the possible growth in this particular demographic, the seasonal changes in demand among new house owners and the possible reduction in lending rates which conferred greater purchasing power among the new home owners in the area. Further, the decrease in the housing units up for sale may have also led to an increase in the appetite as less unit were available in the market, a pointer to fewer home owners putting theirs up for sale. In general, this increase in demand could point to increased consumption in the US economy, as the lending rates are possibly lower hence increasing consumer purchasing power by dangling credit within their reach.
References
Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy. Boston, MA: Cengage Learning.
Davis, B. (2017). Huntsville Home Sales Jump to New High for June. Alabama News Centre [Online] Retrieved August 5, 2017 from http://alabamanewscenter.com/2017/08/02/huntsville-home-sales-jump-new-high-june/
Dell’Ariccia, G., Igan, D., & Laeven, L. U. (2012). Credit booms and lending standards: Evidence from the subprime mortgage market. Journal of Money, Credit and Banking, 44(2‐3), 367-384.
Gowrisankaran, G., & Rysman, M. (2012). Dynamics of consumer demand for new durable goods. Journal of political Economy, 120(6), 1173-1219.
Ingham, G., Coutts, K., & Konzelmann, S. (2016). Introduction: ‘Cranks’ and ‘Brave Heretics: Rethinking Money and Banking after the Great Financial Crisis. Journal of Applied Economics, 19(2), 107-121.
