California Real Estate Practice Exam

When the supply of houses goes up and the demand stays the same, what will likely happen to house prices?

1. Prices go up

2. Prices go down

3. Prices stay the same

4. Prices fluctuate unpredictably

The correct answer is: Prices go down

When the supply of houses goes up, there are more houses available for sale. This increased supply may cause a decrease in demand as buyers have more options to choose from. When demand stays the same, but supply increases, there is a surplus of houses on the market, leading to a decrease in prices. Therefore, prices are likely to go down in this scenario. Option A is incorrect because an increase in supply would indicate a decrease in demand, resulting in a decrease in prices. Option C is incorrect because with a surplus of houses, prices are likely to go down rather than stay the same. Option D is incorrect because the situation described in the question does not lead to unpredictable fluctuations in prices, but rather a predictable decrease due to an increase in supply.