In the US, the rise in house prices elicited a very strong supply response so that, by the end of 2007, there was almost one-year’s supply of newly built unsold houses overhanging the market. US house prices stopped rising essentially because the supply of houses overtook demand.
Graph 5  BIS Review 130/2008  7  Here in Australia the rise in house prices did not elicit such a strong supply response. There were pockets of overdevelopment in apartments in 2003/04 but, by and large, there was never a serious oversupply of unsold new houses in Australia. In fact, the consensus is that there is currently a shortage of dwellings.