Reply To: Housing Crisis


Like the prices of all goods, housing prices move up and down with changes in demand and supply. Housing prices plummeted because demand fell and supply rose. The reduced volume of house sales came from the fact that demand fell more than supply rose. Under those conditions, both the price and quantity traded of a good will decline. If the increase in supply was more than proportional to the reduced demand then price would fall the quantity traded would rise. So, in the housing collapse, demand fell relative to the increase supply. Demand for houses fell from investors pulling out and mortgage credit drying up.