Economics 101: Demand and Supply. Somebody please explain.

The last Treasure Valley Market Report graphed present new construction trends in Ada and Canyon counties but there have been a lot of discussions regarding Boise real estate and Nampa real estate. Last spring we watched the # of homes on the market rise weekly, real estate sales adjust from the banner year before and the number of new homes being built slow down because sales declined. The latest report shows how spec homes inventory increased while new construction decreased yet the supply of lots continues to grow. The REBAR report also graphs these trends.

Here is where things start to get confusing. According to my economics class when demand decreases, which according to all indicators it has, supply or price will adjust a well. Although there are many stories of price adjustments it really has not shown up noticably in trends, average sales price has been sticky. Yet developers stand in line to get dirt approved and recorded for development. Optimism is a good thing and preparing for future growth is a good way to beat the curve but our present analysis for new subdivisions from Boise to Nampa/ Caldwell and even farther does not seem to compare to normalized supply and demand theories. Can someone help us out?