The fact that lower interest rates increased the number of potential customers for real estate in the early 2000s shows that housing prices should have increased substantially. Based on market supply and demand theory, a reduced cost would attract an incredible number of consumers and engage them in mortgages irrespective of their incomes. Technically, housing prices went up because of customers believing that lower interest rates would also reduce the cost of housing, but the effect of reduced interests affected the market a bit differently and created a trap for consumers.
The ultimate upsurge in mortgage rates that occurred around 2005 allowed many mortgage companies to get back on the map while putting a serious financial strain on low-income individuals who were not ready for the increase. Based on the market supply and demand theory, it may be concluded that the presence of consumers who were not able to refinance or secure the existing loans became the first step toward a drastically reduced demand for mortgages. Even though the demand, in this case, could have been defined as decreasing, the majority of average-income families persevered, creating a scenario where mortgage companies continued their operations unaffected by lower-income households.
At the time when the demand for housing begins increasing, it would be much more reasonable to see the costs increasing across San Francisco and not Miami. The key reason for this is the relatively loose laws on subdivisions in the State of Florida that create more room for exceptional maneuvers related to real estate. In San Francisco, on the other hand, both consumers and mortgage companies would have to put up with the increasing housing costs, with the landlords benefiting from the scenario the most.
The mechanisms of the US agricultural market make it possible to maintain a price and quantity equilibrium with the help of a self-regulating market that developed across the country over the last three decades. This means that the majority of desired outcomes are achieved by agriculture finance specialists with the help of specific production areas, such as wheat, for example. Careful predictions related to natural phenomena help manufacturers shift their finance and invest resources in something more profitable, which allows the market to respond to consumer demand without completing any additional steps (Burke & Emerick, 2016). Therefore, US agriculture gets a chance to achieve the highest possible returns with the help of voluntary trades between parties that are willing to exchange resources in the first place. The market-based economy sported across the US turns agriculture into a rather competitive market and mildly forces participants to engage in mutually beneficial trades.
Ultimately, the US agricultural market does not force any of the stakeholders to do something that is not included in their agendas. In return, the market, together with consumers, responds in a fashion that allows different parties to engage in trades that lead to superior economic outcomes. With consumers also aligning their purchasing behaviors to the potential output of the existing market, there is no doubt that US agriculture mostly benefits from the free-market strategy and numerous technologies that facilitate the manufacturing and marketing processes (Crosson & Brubaker, 2016). The shift in supply, on the other hand, affects the demand curve and aids the consumers in terms of contributing to the equilibrium (prices decrease – quantity increases, and vice versa) that keeps the US agriculture afloat. Not only this becomes a valuable local strategy, but also an opportunity for American agriculture to remain competitive across the globe and capitalize on the existing assets.
References
Burke, M., & Emerick, K. (2016). Adaptation to climate change: Evidence from US agriculture. American Economic Journal: Economic Policy, 8(3), 106-40.
Crosson, P. R., & Brubaker, S. (2016). Resource and environmental effects of US agriculture. Routledge.