Housing Prices: Set by Aspiration, Adjusted by Time

Housing prices are determined through aspiration level adaptation, where sellers consult real estate agents to find comparable prices and establish an initial selling price. If a house does not sell within a reasonable timeframe, the price is gradually reduced until it sells or until the seller refuses to go lower. This process shows that housing prices respond slowly to market changes and can result in significant discrepancies between the number of buyers and sellers in the market.