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What actually drives real estate prices up or down? In this video, we break down how supply, demand, and market trends shape the real estate world. Whether you're buying, selling, or investing, understanding these basics can give you a real edge.
You can learn more about how the real estate market works—supply, demand, and trends—on our blog: https://real-estate-crunch.com/how-the-real-estate-market-works-supply-demand-and-trends/
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[Music]
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hi this is Anita from Real Estate Crunch
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i assume that many of you that are
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listening are listening because you want
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to understand more about real estate
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you're looking to purchase real estate
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or maybe you're just interested in this
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subject today I want to talk a little
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bit about how the real estate market
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works in specifics the some of the
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economics of it the supply the demand
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and the trends and you might ask well
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why do I need to know this well this is
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actually really important to understand
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because in understanding this can help
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you if you're buying for yourself make
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the best decisions possible if you
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happen to be a real estate agent this is
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really important for you to understand
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because your customers will depend upon
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you to be able to understand these kinds
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of things for you to help them make the
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best decision possible so let's talk
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first about supply supply in real estate
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really refers to availability of
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property for sale or rent there's
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several factor which could basically
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influence the supply side of things one
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would be new constructions the number of
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newly built homes or commercial
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properties can directly impact the
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supply when construction activity is
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high supply increases often then this
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will help stabilize the prices when
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sometimes when the supply contracts can
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increase the price of construction slows
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down due to economic downturns so these
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can be you know there can be things or
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regulatory problems or labor shortages
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could all be things that can actually
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slow down some of the new construction
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and that can actually have a an effect
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on the real estate market zoning laws
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and regulations can also have an effect
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that you know government regulations
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such as zoning laws or land use policies
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can limit or expand the availability of
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real estate for development strict
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zoning laws can restrict new
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construction reduce supply and increase
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property value and this goes to with
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ability of land that you know densely
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populated urban areas where land is more
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scarce they can restrict the supply of
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the number of new developments leading
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to limited supply and higher property
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prices you know in contrast suburban um
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or real estate areas could have you know
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more available land leading to more you
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know elastic type of
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supply interest rates and fi financial
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conditions can have a difference if you
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know if the interest rates are really
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high or um you know the country's in a
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in a depression or recession you know
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people maybe are not looking to buy
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they're going to stick with what they
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have you know this could actually affect
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real estate prices it could be that
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there could be fewer buyers out on the
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market looking to really buy property
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that normally would be that actually
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goes with understanding of the demand
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that you know demand is something like
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how high is the demand in the area
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economic growth and employment can be
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one thing let's say that you're living
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in an area and suddenly a large employer
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is going to move in and suddenly they're
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going to hire 40,000 people well you
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know there could end up being this
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shortage of housing there which could
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drive all the houses and the property
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values up so a strong economy with job
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growth increases consumer confidence and
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disposable um income leading to higher
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demand for housing and commercial
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properties you know controversially like
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economic downturns can reduce the demand
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for potential buyers and investors they
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could be hesitant to make that big
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decision to be able to buy something uh
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demographics and population growth can
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also make a difference areas which are
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growing you know usually a lot of times
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have higher prices they can
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significantly impact real estate u
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millennials enter entering the housing
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market or first-time buyers can drive
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demands for starter homes while aging
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baby boomers um you know influence can
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demand for retirement communities you
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know things as interest rates and
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mortgage availability too can also you
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know make a difference of the you know
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interest rates are low the the mortgage
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borrowing uh becomes more affordable
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encouraging more buyers to enter the
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market and increasing demand so you know
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the interest rates are lower more people
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are saying like hey this is a good time
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to buy let's start buying now investor
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activity real estate investor activity
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can also play a role you know for it as
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can consumer preferences and lifestyles
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this is you know you look at some places
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that are warm like Florida maybe by the
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ocean people want to live there um
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especially people that are retiring want
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to you know have traditionally wanted to
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go there you know this can make a demand
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and make the prices go higher you know
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for example during the CO 19 pandemic
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increase the demand for suburban and
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rural homes as remote work became more
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common now that as there tends to be
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more of a shift away from the remote
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work you know this could actually change
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too where you know maybe some of the
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urban areas start seeing an increase
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market cycles and real estate trends can
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also make a difference there's four
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phases of the real estate cycle first of
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all the recovery after an economic
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downturn the market begins to recover as
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demand slowly begins to return prices
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remain relatively low and investors
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often find opportunities for undervalued
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property so this could really be a good
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time to buy when you're when it's when
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you're in the recovery mode expansion
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this is when growth increases demand and
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this can be higher property prices uh
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new construction this is could be you
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know there could be rising um home sales
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increased rental demands and substantial
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investment activity hyper supply is what
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happens when the supply begins to
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outpace demand so suddenly now
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everybody's been expanding everybody's
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starting to build new homes everyone's
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starting to do this and suddenly now
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there's a lot more supply out there than
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there is a demand and this leads to a
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phase of excess inventory and this can
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lead to price stabilization or declines
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if the economic growth also slows at the
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same time and then the last one is like
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a re a recession this is where the
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market you know contracts as demand
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drops often due to interest rates or
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economic downturn property values then
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begin to decline and fewer transactions
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occur making the bottom of the cycle you
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know you know marking the bottom of the
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cycle before recovery begins so in other
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words in a recession you need to be
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careful because if you the b you know
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the market could bottom out in other
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words if you buy in the middle of the
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market you you may be bought too high
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you need to really if you're looking to
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buy and to get a deal you need to buy
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when when when it's actually bottomed
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out and recovery is taking place there's
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several ways that you know you're saying
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well how can I look at the know these
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trends before they actually happen you
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know all of this sounds a bit
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complicated well here are some ways that
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you can for the area that you're looking
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to buy you can look at economic and
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employment trends you know if there's
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strong employment the economic trends
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are looking favorable you can look at
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all of that to see how the demand could
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shift population uh migration patterns
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are people moving into the area are
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people leaving the area are the interest
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rates changing are they going up or
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going down what kind of policies is the
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government putting in place are there
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some government policies or some tax
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incentives happening and what about
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technological innovation you know the
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rise of smart homes or or that type of
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thing or AIdriven property management
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can influence also market trends so you
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need to sort of understand all of these
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dynamics together and then you can be
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able to look and see some of the trends
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if you're interested to be able to find
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out more we've written a a blog post on
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this and we will put the link to the
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blog post in the description below how
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the real estate market works supply
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demand and trends we'd like to thank you
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so much for listening we hope that
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you'll become part of our community
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press that subscribe button press it now
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we'd love to have you join with us thank
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you
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