It's no surprise that many young Bermudians fear they have no future on the Island when a free-standing house sells for $1.6 million and a condominium sells for $900,000, as yesterday's story showed.

As dismal as that may seem, there is some light at the end of the tunnel. The underlying story is that overall, the average price of a home fell, albeit slightly, and that suggests the supply of new homes is beginning to exceed demand.

This may be of little satisfaction to people in the housing market who still see no way of meeting the terms demanded by lenders, but it is a start.

It does not suggest that the housing market is set to go into decline, especially as the rest of the economy remains reasonably strong, but a period in which prices steady would be welcome.

Indeed, as United Bermuda Party Sen. E.T. (Bob) Richards said in an opinion piece in last week, the Bermuda economy is currently overheated, and particular segments of the market ? notably construction and real estate ? dangerously so. What is needed is a "soft landing" in which prices settle without crashing.

The recent increase in supply, both in the private and public sectors, will go some way to doing that. But dramatic increases in growth would offset those gains, which is why the scale of proposed hotel developments should be making people nervous.

A period of concentrated development will drive construction prices higher still, and the demand for labour, and therefore housing, will push up rents and hence house prices.

That's not to suggest that there should be no development, but it needs to be done in a controlled fashion so it does not inflate prices even more. It is worth noting that rents continue to increase at a higher rate than the overall inflation rate, rising 4.3 percent year over year in November compared to the general average inflation rate of 2.6 percent. Only health care ? at 6.8 percent ? rose faster. And rental increases were only marginally lower than the 4.5 percent annual increase recorded in September and October.

More development ? especially of apartments in Hamilton ? would help to slow that rate of growth.

Because real estate continues to be seen as an investment vehicle as much as anything else, a slowdown in the rental market is needed if home prices are going to be capped.

It may seem counter-intuitive, but the relatively easy credit that financial institutions are offering is contributing to the problem, rather than alleviating it.

Terms like $6,423 a month on a mortgage for a condominium may not seem easy, but long periods of amortisation, 95 percent mortgages, interest-only mortgages being offered by at least one lender and the fact that lenders have now lent more locally than they have Bermuda dollars on deposit increases demand, and hence prices.

Tightening credit would reduce the amount of money available for property buying ? and speculation ? and could even drive more money into business investment, thus lowering prices.

To be sure, lenders have been raising interest rates in the last year, but there is room to do more. Great care needs to be taken not to set off a depression or to cramp economic development, but the pendulum has swung too far towards loose credit to be sustainable.