Uncertainty, Prices and the Supply of Housing

The dramatic rise in house prices which occurred during the period 1971-73 focussed the attention of economists, politicians and the press on the operation of the private housing market, previously a rather neglected area of economics. The fundamental reason for the rise in prices was that, during the period, the effective demand for dwellings for owner-occupation far exceeded the supply coming onto the market. Whilst the nature of such a disequilibrium position is of little interest in itself, it is necessary to identify and understand the circumstances which gave rise to its existence if it is to be avoided in the future. The link between the lending behaviour of building societies and the rise in house prices has been the focus of attention of commentators and analysts. The period 1969-70 was one in which building societies were relatively short of funds and they were obliged, therefore, to restrict the number of mortgages advanced, with a consequent reduction in the level of effective demand. When funds began to flow once more into the societies they were able to expand their mortgage lending, increasing both the number and the value of these advances, and pent-up demand pressures were released

Disequilibrium · Economics · Flow of funds · Macroeconomics · Market economy · Monetary economics · Period (music · Position (finance · Supply and demand · Value (mathematics · Housing Market and Economics · Urbanization and City Planning · Finance

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