Your economics question of the dayApril 5, 2010 Tim WorstallEconomics7 CommentsLack of houses for sale triggers mounting demand Pick the economic bones out of that statement. previousCleverest women are the heaviest drinkersnextA bit laddish, yes 7 thoughts on “Your economics question of the day” DBC Reed April 5, 2010 at 8:10 am Why don’t you pick the bones out of this ?You’re the one who believes that markets solve everything (see below 3.iv.10).But, faced with the possibility of demand, the housing market shuts down in order to keep up prices.That’s the cornucopia of capitalism for you. And cartels and monoply cannot be blamed: competition from hundreds of thousands of unorganised homeowners is optimal. Markets have to be forced into competition: their natural state is inertia as it is easier for capitalists to take no risks by sitting on land or money and to profit from scarcity.If there’s no scarcity,they’ll create one.Answer to the above: LVT ,the market optimiser or as Marx called it “Capitalism’s last ditch “which the capitalists have shown themselves too stupid to retreat into. Pat April 5, 2010 at 9:07 am Markets have to forced into competition? So we force people to sell their houses for a competitive market? And in the process they have to pay estate agents, lawyers etc. I wonder which of these professions Mr. Reed graces. A perfectly rational explanation to the relatively low turnover in the housing market is that people are turning away from the idea of a house as an investment, and back to the idea of a house being somewhere to live. Formertory April 5, 2010 at 9:28 am “Lack of mortgage availability” is an oversimplification. “Lack of high loan-to-value mortgage availability” and “markedly higher risk premiums for high LTV loans” would be more like it. There is no shortage of mortgages or attractive rates for those with a credit record in good order, and who want a 60% or lower LTV. And if that forces some sanity on a housing market that’s become so distorted that it barely warrants the description, then so be it. I agree with Pat’s comment about people learning at least for now to regard houses as a place to live rather than as an investment. KMcC April 5, 2010 at 1:01 pm DBC Reed: bear in mind that supply is also constrained by planning regulations. It’s hardly a failure of the free market when the hand of govt can weigh so heavily on the scales. Johnathan Pearce April 5, 2010 at 5:03 pm Pat, exactly. DBC Reed April 5, 2010 at 10:20 pm @Pat So the reason the housing market does n’t supply the existing demand is because it is not a market per se (not like that nasty old market that formed a bubble then collapsed and screwed up the capitalist system).This is a mutual co-operative arrangement that makes sure everybody is affordably housed ,personal advantage never entering into it. Whooo och och snortle coughStop it,you ‘re killing me . Tim Newman April 6, 2010 at 7:00 am The reason nobody is selling is because although they are in negative equity with interest rates so low they can still afford the repayments. The reason demand is high is because estate agents say it is in the hope some fuckwit will pay the asking price on some shithole in East London. I saw this for myself last August, I still get estate agents emailing me in desperation whether I want to revise my offer upwards. Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.