Matching supply and demand can be a challenge for people in business. Too much of a gap in either direction can cause shortages and price jumps or excesses which undermine pricing.
To watch this in play, a quick examination of the residential construction business in Saskatchewan provides some insight.
StatsCan released its first-quarter report on new home construction in the country. Saskatchewan was the only province where the total dollar value of new residential construction went down, falling by nearly $20 million compared to Q1 of last year. That’s a pullback of less than three per cent, so not an especially big change but a signal nonetheless. The report points to a decline in the number of new single-family starts for the reduction.
It’s also a sign from builders that inventory levels are exceeding the market’s ability to absorb new homes. So they’re pulling back on their activity to allow demand to catch up to supply before prices erode further due an excess of supply.