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I don't think we'll necessarily see a decrease in demand. We may, however, see a decrease in the quantity demanded as the price level continues to rise. So instead of seeing a leftward shift in the demand curve, we'll see movement along the demand curve to the left, indicating that apartments have simply become too expensive for many people to rent/buy.
Given the strength of the area's economy, I don't see aggregate demand falling off anytime soon.
I would not be so bold as to try to predict how the debate over the federal budget will play out or what impact that will have on the demand curve for housing in the district.
I'm not sure I'm getting the dynamics that would lead to movement up the demand curve - that implies a reduction in supply, which I do not see happening. Perhaps you meant a movement up the supply curve, due to rising demand? But I don't expect that either - maybe demand won't fall, but I am dubious of a signficant increase, at least in the near future.
Exactly. The increase in new construction will probably stabilise or at least slow down rent growth (we're seeing this already). The only way to keep rents from spiking is to continue to build in order to absorb growth.
Again, in theory, but as we all know, theory assumes perfect competition and information. Economic models are not good at accounting for the effects of imperfect information, price collusion and monopolies.
I'll give you an example. I rent out an apartment in DC. Other homeowners will often ask me how much I'm charging, especially if they see I have prospective tenants coming by. If they think my rent is too low, they'll say, "You need to charge at least X. If you start charging Y, then everybody will start expecting Y." This happens every year. No joke.
Seeing that many of these major buildings are built by, owned by, and managed by a small number of players, I would not be surprised if the same thing happens.
I'm not sure I'm getting the dynamics that would lead to movement up the demand curve - that implies a reduction in supply, which I do not see happening. Perhaps you meant a movement up the supply curve, due to rising demand? But I don't expect that either - maybe demand won't fall, but I am dubious of a signficant increase, at least in the near future.
No, I meant an increase in price leads to a decrease in quantity demanded.
No, I meant an increase in price leads to a decrease in quantity demanded. The supply curve does not have to shift in order for the price level to rise.
something has to shift. If the demand curve stays the same, and supply curve stays the same, then the equilibrium price stays the same. Unless the state, or a price setting monopoly, mandates a higher price (which I think is unlikely as well).
Where does the exogenous price increase come from?
To review - the shape of the demand curve and the shape of the supply curve generate the equilibrium price and quantity.
Again, in theory, but as we all know, theory assumes perfect competition and information. Economic models are not good at accounting for the effects of imperfect information, price collusion and monopolies.
I'll give you an example. I rent out an apartment in DC. Other homeowners will often ask me how much I'm charging, especially if they see I have prospective tenants coming by. If they think my rent is too low, they'll say, "You need to charge at least X. If you start charging Y, then everybody will start expecting Y." This happens every year. No joke.
Seeing that many of these major buildings are built by, owned by, and managed by a small number of players, I would not be surprised if the same thing happens.
for that to work they would either have to keep existing units vacant, or refrain from building new ones in order to keep rents up.
Unless the published vacancy rates in DC are being faked, the former is not the case. (I think a conspiracy to keep PARKING rates high is more likely, as I've seen it noted recently that garage owners are very reticent to share info on how many spots they actually have) As for the latter, while its conceivable that there is a developer conspiracy, and that in its absence there would be even MORE new construction, I personally am skeptical.
something has to shift. If the demand curve stays the same, and supply curve stays the same, then the equilibrium price stays the same. Unless the state, or a price setting monopoly, mandates a higher price (which I think is unlikely as well).
Where does the exogenous price increase come from?
To review - the shape of the demand curve and the shape of the supply curve generate the equilibrium price and quantity.
Again, in theory, but as we all know, theory assumes perfect competition and information. Economic models are not good at accounting for the effects of imperfect information, price collusion and monopolies.
I'll give you an example. I rent out an apartment in DC. Other homeowners will often ask me how much I'm charging, especially if they see I have prospective tenants coming by. If they think my rent is too low, they'll say, "You need to charge at least X. If you start charging Y, then everybody will start expecting Y." This happens every year. No joke.
Seeing that many of these major buildings are built by, owned by, and managed by a small number of players, I would not be surprised if the same thing happens.
Of course those discrepancies exist, but we need to come close to an oversupply of rentals for the theory to work. Look at Harlem: rental prices have remained low even in luxury buildings due to overbuilding. Now that's not good for the development industry and they drive economics in DC, so we don't want what happened in Harlem to occur here, but something close enough to balance the interests of developers so that they continue to build but also ensure that tenants still have some degree of leverage.
Or they could simply keep rents high because they can.
because they can in what sense? That the equilibrium rent is high, or that because they can set a price above the equilibrium rent?
Again you are speaking of an increase in rents (i presume inflation adjusted) That implies a change - either in the equilibrium rent (which implies a shift in either the demand or supply curves) OR a shift FROM the competitive equilibrium rent to a monopolist rent. Im not sure which you are suggesting.
yes, thank you for posting a link to a text book definition of demand. You still have not explained what change you think would to increasing real rents (other than an increase in demand - IE a shift of the demand curve).
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