There has been some debate this week about why house prices are apparently resistant to the normal laws of supply and demand. This blog has been cataloguing the moribund state of the UK housing market for months now, yet houses are still expensive and the prices are going up.

The supply of buyers has been restricted by banks and building societies, who continue to ration their mortgage funds. The economy is flat, with unemployment high and people’s real incomes being driven down by a combination of inflation and low wage rises. And the level of home sales is roughly half what it was before the banking crisis. So why have prices not collapsed?

The first thing to say is that not everyone believes the statistics. Each month a slew of house price figures are published by the government (DCLG), Land Registry (for England and Wales), lenders such as the Halifax and the Nationwide, and industry bodies such as the Royal Institution of Chartered Surveyors (Rics).

They often show different monthly movements and variations in medium term trends. This year they show, variously, that average prices have either been falling gently, have stagnated, or, in the case of the Nationwide, have actually been going up since the start of the year.

Analysts claim that the national position is being distorted by what is going on in London - where prices have been most resilient. However, even this could change.

The big picture remains the same, for most of the country there has been not just a state of collapse in transactions, but prices. The volume of transactions is very low and is not going to get any better, especially when asking prices are 35-40% above actual selling prices. In London and the South East transaction numbers have collapsed, so prices could be set to follow.

The wider economy of a region also has an important effect. One-third of all jobs created since the end of 2009 have been in London and three-quarters of all jobs created have been in London, the South East, South West and in East Anglia. So the north-south divide is real in the labour market.

Indeed, anywhere outside London things are very different indeed, with sales very much in the doldrums and prices falling. According to the Land Registry, they have dropped in the past year by 11% in Blackpool, 7% in Hull, 10% in Peterborough, 12% in Hartlepool, 12% in Port Talbot, and 9% in the county of Northumberland.

The chief economist at the Nationwide has analysed the issue and says the key factor determining the trend in house prices is the character of the local economy. It reflects how much manufacturing you have in your area. Those regions with most manufacturing are currently those where prices are the lowest, compared to their peak.

Another interesting point is the current gap between the prices people demand, and the prices their homes actually sell for, assuming they sell at all. Rightmove, the estate agency website that claims to advertise 90% of all homes for sale in the UK, says current asking prices across the country average £236,597.

Selling prices, however, are much lower. The average house price is currently £203,528 (DCLG), £168,205 (Nationwide) or £163,049 (Halifax).

Depending on which survey you favour, this gap could be as much as a whopping 45%. Rightmove explains that the price falls of the past few years mean that many people, who would like to sell, cannot afford to drop their prices.

 That would crystallise their negative equity, scuppering their plans to trade up or move on.

More than a million former first-time buyers are prisoners in their own homes, prices are 18% below their 2007 peak when most people were buying with a 95% mortgage. Even if they intended to sell they don’t have the 20% deposit they now need to put down on the next house.

General consensus now is that the national momentum is downwards. There is still a huge extended over-valuation in the market, any change in the employment situation and consumer sentiment due to income changes will tend to push prices down.

But several other factors may help push prices the other way, or at least stop them falling much. Low interest rates, which some think will persist into 2013 or even beyond, may help keep tens of thousands of people in their homes when they might otherwise have been repossessed.

Banks and building societies have been making swifter-than-predicted progress in repaying the emergency lending they had to take from the Bank of England and the Treasury in 2008 during the height of the banking crisis. As a result, some people may find it a bit easier to get a home loan.

There is much debate about the short and medium term trends in the UK housing market, however almost all analysts agree on a fundamental danger in the long term. Not enough houses are being built.

There were only about 107,000 new housing starts in the past financial year and only 106,000 completions. But 240,000 new households were being created by a growing population, boosted by continued immigration.

The trend of small improvements in the UK housing market continued in June as the Council of Mortgage Lenders (CML) said total mortgage lending picked up but was still lower than a year ago.

Total lending to home owners was £12.9bn last month, up by 16% from May but 3% down on June last year.

For the first six months of the year, total mortgage lending was only slightly down on last year’s figure, at £63.7bn.

The CML said the subdued state of lending reflected the poor state of the economy and household finances.

Last month the UK economy continued to experience disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market. None of these are conducive to a healthy property market.

The CML also condemned recent emotive headlines on the prospects of house repossession saying that, given that the state of the economy, large interest rate rises are not expected in the foreseeable future.

However, analysts believe that there will be moderately higher arrears and possessions through the second half of 2011 and into 2012. This is a reflection of the general malaise in the economy.