According to the Tutor2U article entitled, "Demand and Supply for Housing," (2005) the housing market exhibits fairly classical features of micro economic supply and demand principles. Sellers can chose at what price they wish to sell their homes while buyers can select from the available offers to find the best match for their budgetary and housing needs. When supply exceeds demand, buyers have a greater selection of potential homes to select and sellers must lower their prices to become more competitive, while a shortage of desirable housing within a certain area for a number of buyers will allow sellers to raise their prices for the same available homes. For example, in the same area, a buyer's market might look like this:.

             Houses.

             100,000-3 buyers.

             150, 000-2 buyers.

             200,000-1 buyer.

             However, in a seller's market, the same houses could fetch higher prices, with more buyers per home:.

             Houses.

             150,000-6 buyers.

             250, 000-4 buyers.

             300,000-2 buyers .

             However, although the housing market may exhibit classical micro economic principles of supply and demand, the housing market is relatively inelastic in the short term, as it takes longer to, for example, build a home than to increase a store's supply of apples in response to increased demand. Housing supply only becomes more elastic over time.

             Aggregate demand for houses is also subject to other pressures besides the price of houses, because many factors influence the buyer's demand for a new home, regardless of price. Economic prosperity, rising income, and rising consumer confidence will all stimulate housing demand. Because buying a house is such substantial commitment and life change, ordinary consumers often need to have these extra favorable indicators to motivate them to make such as large purchase.

             A final influence upon the housing market is government policy. In an example from the United Kingdom, when a mortgage interest tax relief program by the government was phased out, housing demand declined.