The market demand and supply mechanism as a result indicates that when the demand for the properties increases in the market, the prices tend to increase as well. The demand can increase due to migration of people into a region or because of increase in the population in the region or even due to fall in unemployment. Similarly, when the supply of the houses or properties increases in the market, the prices for the houses and the properties tend to decrease.
The housing prices in the US are in a slump because of the increased demand for houses which was being matched by the banks and lending companies extending aggressive lending of mortgages to the sub prime market. This sub prime market has been unable to return back the money as their income is constraints. This has lead to the lending and mortgaging companies to record and report huge losses and write off the debts of the sub prime market. The UK market as a result is also being affected by the recession in the US and the state of the housing market in the United States. Over the period of years lending to the sub prime market in the UK has also increased. The buy to let options in the UK would be the first ones to repossess the properties in the event of a slump in the US housing sector and the resultant negative equity.
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