Chapter Two: Demand of Single-Family Homes

http://news.yahoo.com/s/nm/20071030/bs_nm/usa_economy_homes_index_dc;_ylt=Ak5M7gCmnNtZRVFzua8b3IDv5rEF

Prices of single-family homes are dropping at its fastest pace since 1991. In 1991, there was the worst annual decline of 6.3 percent. Prices are dropping at around 0.8 percent a month this year. Tampa and Detroit have the steepest yearly price drops of 10.1 percent and 9.3 percent. Single-family homes are expected to have a record 7 percent year-over-year drop by December. These declines would bring mortgage rates 0.5 to 1 percent down to boost affordability measures. “The fall in home prices is showing no real signs of a slowdown or turnaround,” says Robert Shiller, founder of the indexes and chief economist at MacroMarkets LLC.

The demand for single-family homes is decreasing rapidly because of many factors. First, the prices before were so high that it was out of many peoples incomes. They had to lower the prices now since many people could not afford houses. Substitutes for housing has also been gaining popularity. Apartments and condos are gaining a good reputation and are beginning to become as popular if not more popular than single-family homes. Speculators are also selling the houses they own since they feel that the prices are going to drop. The population is also slowing down a bit because of the awareness of being overpopulated. This slow down is also causing housing prices to slow down as well. Finally, the taste and preferences of smaller families and apartments are increasing. People do not need to have single-family homes as they did a couple years back.

I think the price drop is a good thing for the economy because it allows houses to be more affordable. Prices have been going up non-stop for a long period of time now and it’s good that the prices are changing paths. I’m planning on living in a house when I am older, but was worried about the constant increase in prices. Now that the prices have dropped, it makes getting a house a lot easier. The demand for houses will rise again in the future, but I think it will keep rising and dropping around the same range.

Chapter One

http://biz.yahoo.com/ap/071002/dean_foods_outlook.html?.v=5

Deans Foods Co. plans to cut 600 to 700 jobs, over 2% of their employees. Dairy products prices are beginning to drive up because of foreign trades. Many Asian countries are in high demand for dairy products from the States and it has caused the prices in the States to go up as well. A gallon of milk that used to cost $3.29 is now $3.87 in just seven months. Deans Foods reason for the cuts is to produce more revenues by not paying as many wages. Deans isn’t making as much money as before because many consumers are switching to private companies for their dairy products. Deans is the nation’s largest dairy producer, selling dairy to over 50 different companies.

In our textbook in Chapter One, we studied opportunity costs as well as scarcity. This article shows that when a lot of dairy products are bought, they become scarcer and therefore their value rises. The example of opportunity cost in this article is shown when they cut 600 to 700 employees. The opportunity cost of this action is the jobs that the 600 to 700 employees had must be covered by the other employees. Another opportunity cost would be paying severances to the employees they layoff. This could cost them a lot of money for no labour gained at all.

Deans’ actions they plan to do seem very reasonable and intellectual in my opinion. They already have a lot of workers and spreading out the 600 to 700 workers jobs throughout the remaining workers will be extremely easy with their 26,500 employees. They will be saving a lot of money a year as well (Around $30,000 a year per person times 650 average workers = $19,500,000 a year). They should also sell their dairy for less money so that more people are coming back to Deans instead of switching to a private company’s dairy.