Some Mechanics of Housing Supply & Demand (and how lag screws it all up)

photo credit: Alanah.Montreal

A recent story on All Things Considered offers a good example of how housing markets respond to “shocks.”  The most recent shock, the mortgage crisis, shifted a lot of prospective homebuyers to put off the task of purchasing a home, instead opting for safer, short-term rental options.

In the feature, NPR reports that rents in New York fell immediately following the financial crisis, which makes sense.  In the short-run, many people have less income they’re willing to put toward rentals.  But over the intermediate run (i.e. now), we’ve got a different market of consumers, many looking for spaces as renters, not homeowners.