What is a possible consequence of an oversupply of real estate in a certain market?

An oversupply of real estate in a market typically leads to a decrease in property values. This occurs because when there are more available properties than potential buyers or renters, sellers and landlords may be forced to reduce their asking prices to attract interest. As properties remain on the market longer without being sold or rented, the perception of these properties can diminish, further driving down prices. This imbalance between supply and demand creates downward pressure on property values, making it more difficult for owners to maintain or increase their property valuations.

In contrast, an increase in demand would be unlikely in an oversupplied market, as prices typically tend to fall rather than rise when there is a surplus of properties. Price stabilization would suggest a balance between supply and demand, which is not the case when there is an oversupply. Additionally, higher rental prices would generally occur in a market with limited supply or high demand; thus, it is counterintuitive during periods of oversupply.