For example, suppose in a mythical town there are 100 houses for sale, for $100,000 each. 101 buyers set out on Sunday to go to open houses, each buyer willing and able and wanting to buy a house. Clearly, one buyer will go home with no signed contract for a house. But rather than sit home and say "Well, I guess I'll just have to rent," chances are, that 101st buyer will offer $101,000 for a house, and likely snag it from a lower bidder.
The problem is, that lower bidder may, in turn, bid up another house by $1,000 or outbid the other fellow by another $1,000. The net effect is a price war. Since the increase in monthly mortgage payment for an additional $1,000 to $10,000 is pretty minimal, chances are, prices will escalate by at least $5,000 to $10,000 before finally one bidder says "You know what? That's too much money for a house in this jerkwater town! I'd rather rent" and the market finds its equilibrium price.
But note how the housing price shot up 5-10% or more in response to a 1% offset in the buyer/seller balance. And also note how the process is reversible - if there are only 99 buyers in the marketplace, it is a buyer's market, and one home seller will end up holding on to a home he doesn't want - unless he lowers his price far enough to snag someone else's buyer - or persuade a non-buyer to become a buyer, and thus restore the buyer/seller equilibrium.Small Changes in Supply and Demand Result in Huge Changes in Market Valuation.