Ratings agency Fitch made a big splash recently, forecasting the housing market will crash again. House prices have been rising steadily from their low point in February. The Fitch forecast is based on the notion that the ratio of house prices to incomes will ultimately revert to its long-run average. This involves a fall in house prices of around 20 per cent from their September level.

Two questions spring to mind. First, if house prices have got to fall, why are they moving in the wrong direction? It is not because of mortgage availability. Deposits required of first-time buyers remain much higher relative to incomes than at any time in the last 20 years.

The argument seems to be that prices are rising because demand is outpacing supply, but that this low level of supply is somehow “artificial.” For example, someone who has been left a property by a deceased relative is renting it out as opposed to selling at a price below the 2007 peak.

But why is this artificial? Why are people in this position suddenly going to flood the market with properties for sale, driving prices down? Any sign of this starting to happen would surely lead to their sticking in the rental market. After all, the number of households is continuing to rise far faster than housebuilding so there will be no shortage of potential tenants.

The second question is more fundamental. Why should the ratio of house prices to incomes have to remain the same in the longer run? The population relative to the number of available homes must have some impact on house prices. In the 1990s, the number of new homes built in England exceeded the rise in the number of households by over 200,000. Since 1999, the rise in the number of households in England has exceeded the rise in the number of homes by over 500,000.

This information might lead us to expect that the ratio of house prices to incomes will be higher in the last decade than it was in the 1990s and will not revert to its long-run average level. Or do population pressures have no effect on house prices, as the Fitch forecast and many others would have us believe? These predictions may well be correct. But I wouldn’t bet on it.