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Tag: supply and demand

  • From my vantage point, stabilization is underway in Gulf Coast housing market | Home Front

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    Budge Huskey is chief executive officer of Premier Sotheby’s International Realty.

    Stabilization. Admittedly, an odd choice of words in a year when little feels normal and uncertainty dominates on macroeconomic, geopolitical, and real estate fronts. Yet call me an optimist: I believe we are overlooking signals pointing toward it.

    The premise may surprise when recent media coverage has been awash with predictions of Florida real estate’s inevitable collapse, spotlighting several west coast markets appearing on rankings lists, and not the good ones.

    Let us be candid. Year-to-date, every market from Naples to Tampa has delivered fewer sales. Inventories of unsold homes have swelled compared to the same period last year. Typically, these conditions foreshadow downward pressure on prices.

    Still, context matters. Across the country, values surged in the wake of a pandemic once feared to be the death knell of real estate. Florida, in particular, benefited with home values rising an estimated 60% between 2019 and 2024. At present, equity is unprecedented.

    With such accelerated sales and appreciation, demand was undoubtedly pulled forward with prices overshooting traditional benchmarks. Yet homes remain an emotional asset with values often defined as much by perception and desire as by fundamentals.

    Today, many reports highlight the unprecedented gap between consumer price inflation trends and home values, or the disconnect between wage growth and housing costs. Understandably, potential buyers are waiting anxiously for a “crash” to unleash opportunity.

    In more than four decades in the industry, I have never witnessed a sustained sales slowdown like the present one without an eventual toll on prices. Historically, it’s simply a matter of timing, with some cycles lagging others. Yet this time may prove different, once again because of the basics of supply and demand.

    Recent weeks – hardly long enough to declare a trend – have nonetheless shown an uptick in activity along the Gulf Coast. Pending contracts are climbing. In more than one market, the first four months lagged the prior year, but the last three outpaced it. Whether due to buyers sensing leverage, recognizing interest rates will not shift materially in the near term, or simply deciding life cannot wait on global certainty, energy is returning. Mortgage applications are up almost 20 percent year-over-year, and online portals reflect the highest level of home search terms in the last two years. NAR just reported that June closed sales came in above last year for the first time in six months.

    On the supply side, patterns are shifting as well beyond normal seasonality. While the first half of the year brought more new listings than last year, since June the reverse has been true. National data confirms: June’s inventory dipped below May’s.

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  • Ticket Scalping And Housing Vouchers: A Tale Of Limited Supply

    Ticket Scalping And Housing Vouchers: A Tale Of Limited Supply

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    Concert ticket prices have soared to new heights this year, causing angst and financial stress for live music fans. Blame has been pointed at ticket sales companies like TicketMaster and profiteering scalpers. President Biden has even proposed legislation aimed at the problem. But similar to the housing market, the unaffordability of music tickets is due to a fundamental lack of supply.

    The Mismatch Between Demand And Supply Of Live Concerts

    In the live concert market, there is a mismatch between the price that an artist like Taylor Swift or Beyonce would like to charge their fans and the price that the wealthiest fans are willing to pay. These stars may want to provide all their fans with affordable concert tickets, but wealthy fans are willing to pay hundreds or even thousands of dollars for guaranteed admission. However, stadiums can only hold so many attendees and artists can only do so many shows without becoming exhausted. With ticket availability restricted, the demand from affluent fans results in ticket prices that are unaffordable to the average fan. Some fans get priced out altogether, and even fans willing to spend hundreds of dollars may only be able to afford seats in the nosebleed sections.

    You can see this mismatch most clearly when big music stars decide to do a limited audience event. In 2011, Beyonce performed for four nights at the 3,200 person capacity Roseland Ballroom. The first show sold out in only 22 seconds, and the remaining three concerts sold out in less than a minute. Any fan without lightning fast reflexes had to buy tickets on the resale market for considerably more than the original price or miss out on the event.

    Housing Vouchers Are Effectively “Sold Out”

    A similar phenomenon occurs in the market for affordable housing. Housing choice vouchers, which provide rental assistance to low income families, are effectively “sold out.” Families who qualify for the program often wait years to get off the waitlist. The government would ideally like everyone who qualifies to be able to receive the rental assistance, but since there is a limited supply of vouchers and affordable housing units, many families continue to struggle with housing costs.

    To make matters worse, in some cases the housing voucher program is abused. Landlords sometimes overcharge for substandard housing. One study found that Milwaukee landlords charge housing voucher recipients around $60 more per month than other tenants. This is akin to scalping in the music concert market. Bad actors take advantage of the mismatch between supply and demand to earn a profit.

    Stop Bad Actors By Increasing Supply

    The best way to fight scalping is to increase the supply of tickets. Take for example the story of controversial rapper Travis Scott’s recent concert tour. Initially, Scott’s tour was expected to sell out rapidly. As a result, scalpers swarmed in, purchasing thousands of tickets at an original price of approximately $60, with plans to resell at inflated prices. In a twist of fate, Travis Scott expanded the tour by adding more dates to his schedule. Suddenly, the scarcity that scalpers had bet on had disappeared.

    As a result, the resale value of tickets nosedived, with some being listed for as low as ten dollars on popular platforms. The scalpers who had invested heavily in these tickets found themselves grappling with a steep decline in their investment’s value. For many, this translated into losses in the tens of thousands of dollars.

    Increase Supply Through Policy Changes

    Similarly, we can make housing affordable and eradicate bad actors by increasing the supply of homes. This can be achieved by eliminating single-family zoning, removing red tape that restricts the construction of new housing, subsidizing the construction of affordable housing, and building affordable housing on government-owned land. If we can achieve this increase in supply, rents would stabilize and potentially drop. Homeowners may stop seeing whopping annual increases in their home’s value, but they would have an easier time upgrading to homes that better fit their needs. Owners of multiple investment properties who reap outsized profits from renters would lose the most. However, more families would be able to access affordable housing.

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    Daryl Fairweather, Contributor

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  • How Land O’Lakes convinced its farmers to embrace A.I.

    How Land O’Lakes convinced its farmers to embrace A.I.

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    Beyond the technical challenges of incorporating artificial intelligence into their internal systems, companies face another quandary: how to get employees to buy into the changes that A.I. can bring.

    At Fortune‘s Brainstorm A.I. conference in San Francisco on Monday, Teddy Bekele, CTO of agricultural cooperative Land O’Lakes, and Fiona Tan, CTO of online furniture retailer Wayfair LLC, compared and contrasted how workers at their companies have embraced—or raised an eyebrow at—efforts to introduce A.I. into the supply chain.

    Land O’Lakes is using A.I. to approximate the supply and demand of different products at different times of year. The technology has become a tool used directly by the company’s farmers. Farmers see it as assisting their decisions, not replacing their expertise, Bekele says. Yet getting the farmers fully on-board takes some convincing, he says, since planting and harvesting are high-stakes decisions. “Farmers will always try things, they’re entrepreneurs at heart,” Bekele explained. “However, to fully adopt it in their operation, they want to make sure the solution really works.” 

    Some A.I. models can seem counterintuitive to farmers at first. Bekele brought up the example of using A.I. models to determine the best locations to plant crops based on climate, topography, and soil. At times, the A.I. suggestion differs from where farmers have planted crops in the past. “On paper, [the A.I. model] doesn’t sound right,” Bekele says. But with some explanation, farmers come around to the idea.

    A.I. can also serve as a sort of second opinion for farmers. They input their own data into the A.I. tools and use the system to confirm their own instincts.

    Wayfair is a digitally-native company so its employees are fairly open to adopting new tech, yet Tan says that a tech-savvy workforce can become frustrated that A.I. doesn’t move faster. “Sometimes there’s impatience for the models to work immediately,” Tan said. “It’s not like it’s deployed today and it’s all going to work magically,” she said. 

    When Wayfair adds A.I. to internal processes, it starts with low-stakes tasks to mitigate the risk of errors and ensures humans are still checking the technology’s work, Tan says. “For example, in marketing, the worst that can happen is you pay too much for a bid, so that’s something we can tolerate,” she said. “Yet other areas, like when looking at images or text for the product to ascertain the quality of the furniture, we’ll have models give a suggestion or recommendation, and humans can go back and make sure it looks good,” she said. 

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    Lucy Brewster

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