> If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. Not if there’s a s

> If too many buyers are priced out (by either high prices or high interest rates or a combination of both) then we'll see markets stagnate. Not if there’s a supply shortage. If there is a supply shortage then that necessarily means that some people will be priced out without corresponding downward price movement. 10 people, 5 houses, the market-clearing price is the 5th highest price any of the people are willing to pay. Remove the 5 people on the low end and that’s still the market-clearing price. The equilibriating force of price increases causing demand to drop causing downward price pressure only keeps prices in equilibrium around the market-clearing price. Supply shortages shift the supply curve and cause the market-clearing price itself to move. The equilibriating force that should address this is that increased prices should incentivize new supply to be created from sources that were previously uneconomical, but the supply shortage exists because of legal restrictions that distort the market.