A major manufacturer of automobiles announces that it will relocate one of its factories, along with 2000 employees, to a small town. What effect will this announcement MOST likely have on the small town's housing market?

The announcement of a major automobile manufacturer relocating a factory, along with 2,000 employees, is expected to have a significant positive impact on the small town's housing market. The influx of new residents, specifically the employees who will need homes, typically drives up demand for housing.

As demand for housing increases due to the arrival of these new residents, competition among potential homebuyers or renters will raise housing prices. This is especially true in a small town where the housing supply may be limited. The increased demand can lead to a scarcity of available residential properties, which often results in sellers raising their prices or new constructions being initiated to meet the growing demand. Consequently, houses in the area are likely to become more expensive as the market adjusts to accommodate the influx of people associated with the factory's move.

This scenario also illustrates economic principles such as supply and demand at work, where the introduction of a large number of potential buyers increases overall market value for housing in the area.