Market Trends
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Market Trends
Catherine Bowen, and Michael Duncombe
University of Phoenix
ECO 365 Principles of Microeconomics
Tim Price
April 14, 2008
Market Trends
Uncertain - indefinite, indeterminate, not clearly identified or defined (Merriam-Webster’s, 2003). Uncertain is what can be said about the market trends facing the housing industry today. From fluctuating prices, out of control cost structure, to advancements in technology and supply high while demand is low, economists are uncertain how long this housing slump will last. What is certain is how consumers will deal with these changes and how homebuilders will prepare for them. Toll Brothers has more than proven that through any economic downfall, they can prevail. This week’s paper will provide and analysis of how select market trends will or will not change for Toll Brothers and the housing industry and why.
Market Structure
The market structure of Toll Brothers has become monopolistically competitive. Toll Brothers in recent years has expanded from the eastern United States into more western states including Nevada and California. Toll Brothers in an effort to increase profits has expanded into other industries including mortgage services, security services, golf course management, and cable and internet services.
The market has a cycle. When home sales are up, there is more incentive for new builders to jump into the construction market to get a piece of the profits. As these new builders flood the market with homes, the prices will decrease and the supply will increase as the demand stays the same. The excess homes will sit vacant, and the builders will lose profits. Builders who have not set funds aside for the down turn in the housing market, and have a large inventory of homes will be forced to close their doors.
As the bad business builders are weeded out of the market, the excess supply will slowly be sold. After some time has passed the market will become good again,...
Catherine Bowen, and Michael Duncombe
University of Phoenix
ECO 365 Principles of Microeconomics
Tim Price
April 14, 2008
Market Trends
Uncertain - indefinite, indeterminate, not clearly identified or defined (Merriam-Webster’s, 2003). Uncertain is what can be said about the market trends facing the housing industry today. From fluctuating prices, out of control cost structure, to advancements in technology and supply high while demand is low, economists are uncertain how long this housing slump will last. What is certain is how consumers will deal with these changes and how homebuilders will prepare for them. Toll Brothers has more than proven that through any economic downfall, they can prevail. This week’s paper will provide and analysis of how select market trends will or will not change for Toll Brothers and the housing industry and why.
Market Structure
The market structure of Toll Brothers has become monopolistically competitive. Toll Brothers in recent years has expanded from the eastern United States into more western states including Nevada and California. Toll Brothers in an effort to increase profits has expanded into other industries including mortgage services, security services, golf course management, and cable and internet services.
The market has a cycle. When home sales are up, there is more incentive for new builders to jump into the construction market to get a piece of the profits. As these new builders flood the market with homes, the prices will decrease and the supply will increase as the demand stays the same. The excess homes will sit vacant, and the builders will lose profits. Builders who have not set funds aside for the down turn in the housing market, and have a large inventory of homes will be forced to close their doors.
As the bad business builders are weeded out of the market, the excess supply will slowly be sold. After some time has passed the market will become good again,...