Scarcity

Definition of "Scarcity"

Written by

Ralph Abate, PA

Premiere Plus Realty

Scarcity is a fundamental term in economics, mirroring the limited resources and needs gap. The shortage demands consumers to make logical decisions on spending their money efficiently. Often referred to as ‘paucity,’ scarcity, in other words, is the principle of allocating resources to satisfy as many personal needs as possible.

Relative vs. absolute scarcity

In various cases, resources come in limited quantities available on our planet. For instance, oil is accessible in limited supplies, while the demand surpasses the available amount. In short, Earth is running out of this natural resource. We call this relative scarcity. As opposed, absolute scarcity is naturally limited, and we can’t do anything to grow its supply. Still, its quantity won’t disappear. Time, for example, is an absolute scarcity.

Scarcity in real estate

Scarcity pinpoints an inadequate or limited supply for real estate in a particular area. If real estate scarcity occurs, it will lead to a change in the demand-supply relationship. Thus, this event will result in price increases for the property. Indeed, the property’s current owner will become the primary beneficiary of the initial real estate scarcity. 

Let’s inspect a real-life example! An explosive growth took place in Orlando, Florida, in June 2021, reaching $315,000! As a result, property values skyrocketed in selected areas. It would be best to reach out to the local real estate agents to find out if this city is experiencing real estate scarcity!

The consequences of real estate scarcity

Scarcity in the US is a real thing and triggers various housing issues. 2021 saw Wall Street big investment firms and real estate investment trusts purchasing single-family homes in bulk and even complete subdivisions in certain US cities. Consequently, house buyers and renters raised their voice in concern that they wouldn’t stand a chance price-wise against big corporates’ unaccountability. Their worries were not unfounded. There is a genuine chance that Investment companies would keep housing prices up high and increasing. 

Small-time investors are also prone to property speculation. They intended to buy as many properties as possible in cash (no mortgage) and operate them as rentals. Also, many would hold on to their real estate and wait till development interest in the region grows. 

Another worrying consequence of scarcity could lead to long-term rental problems. In other words, landlords could choose to rent their properties for short-term leases, such as Airbnbs, over traditional renting to long-term tenants. In addition, housing scarcity can result in real estate discrimination and a growing trend in evictions. For these reasons, housing market predictions for 2022 are cautious.