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High prices do not immediately imply supply when supply is constrained. Houses aren't widgets. They sit on real-estate, each parcel of which is unique. As a metaphor, think of an island: the supply is limited. As demand rises, so the price rises. But supply can never increase, so prices just keep rising forever. The land around most cities aren't islands, ...


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The principles of demand and supply are always operating in the background so they are not pointless. The magnitude of the effect that increase in price has on increase in supply is given by the price-elasticity of supply for housing. If the supply is inelastic then it takes large increases in prices to increase the quantity supplied. In a an extreme case ...


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