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> land/housing prices will quickly recover and continue to outpace wage growth and many other productive investments

Saying land/housing prices are outpacing many other productive investments seems like a stretch. If you look at the performance of large US REIT ETFs versus market indices like the SPY the rent seeking behavior by real estate investors doesn't look so profitable.

I can't claim expertise comparing particular funds. But for example, hasn't Vanguard's Real Estate EFT outperformed the S&P 500 by a wide margin?

And beside serious investors, for the typical individual, a home loan allows them to leverage funds that are unimaginably beyond what they could raise for investment with vastly more safety. Not that I suggest it would be better if half the population could and did buy stocks on unlimited margin or the like.

I just want to point out that even on this one particular issue, we gradually made policy and decided and made it such that one kind of loan is vital and the other insanely too risky. That at this point, this is so ingrained that it's hard to imagine any alternative. But I suggest we should probably try.

The S&P 500[1] has outperformed the Vanguard Real Estate ETF[2].

[1]: https://investor.vanguard.com/mutual-funds/profile/performan...

[2]: https://investor.vanguard.com/etf/profile/performance/vnq

> And beside serious investors, for the typical individual, a home loan allows them to leverage funds that are unimaginably beyond what they could raise for investment with vastly more safety. Not that I suggest it would be better if half the population could and did buy stocks on unlimited margin or the like.

This is a very important point. Buying real estate is the most accessible way for an average-income household to get leverage - at least in the US where heavily leveraged financial products like CFDs are not easily accessible (at least to my knowledge). But in my opinion this another argument against investing into real estate because lots of uninformed buyers are in the market with increasing amounts of leverage leading to rather dramatic boom and bust cycles (like in the housing crisis of 2008).

> It will not crash. There maybe a temporary double digit dip in prices described in hyperbolic "end of the world crash" terms to demand government intervention to prop up prices.

This is probably true. In the short-medium term housing will not be allowed to crash for the simple reason that homeowners vote. The soundness of the economy in general will be sacrificed to pump house prices.

This feeds a feedback loop that makes housing an even more attractive place to park capital, further driving up housing costs.

Of course eventually this gets so unbelievably ridiculous that we have some kind of revolution. Look for $2m starter homes before that happens.

I’m hoping for a less drastic resolution, like people voting left-wing parties whom will more or less cap rents/increase capital/estate taxes to even things out a bit. Would you not see this possible?

I don't see how that is a resolution. Increased taxes mean more expensive housing. Capped rent means less available housing stock which will be fine for the first 10 years but over time more people come to the location and drive up prices again.

There are two things you can influence either supply or demand. You're reducing supply but keeping demand the same or allowing it to grow. The answer is to increase supply and reduce demand.

The thing is, the places that are supply constrained have optimized themselves into being in extreme demand. They know they don't have enough housing but that doesn't stop them from building more commercial real estate to enable new businesses. Those businesses could have been founded somewhere else but why bother when the most suitable city still has enough room for you (but not for the employees)?

This.

I don't understand why there aren't more employees demanding to move the company out of the state.

people do ask for this. the trouble is they all agree they want to move the office, but can't agree where to put it instead.

>> It will not crash.

you are wrong and you do not know history. it will crash and then it will recover and then it will crash again. real estate is cyclical.

I would argue, it will crash. But not anytime soon. More around 10ish years or even more.

States, money and firms are now in a tight gridlock. Way more than before.

So will just pumping out more money. Fear the day "they" decide to flood the real market with money and not just stocks and shares.

Do you know what is the average time difference (in years) between peaks in construction (and land values as a result), historically speaking?

That depends. In Barcelona prices peaked around 2008. Then went down at around the same rate that they went up at. Until ~2013 Then went up again. Is that considered a crash?

in '08 it certainly was. this is not "important" if its your house - since you live in it, values could go down to zero - who cares? you still need a place to live in. It becomes very important if we are talking investment.

I agree it's going to be a double-digit dip, but on the basis that such a dip could go all the way up to 99%.

I don't think that makes much sense in a country that's population is growing. People need to live somewhere and increasingly its in cities (where most of the price growth seems to be happening).

I tend to agree with you. Land and housing are still very cheap in rural towns in the midwest - they've moved no more than 2% / year or close to the reported inflation rate.

So why are homes so expensive in urban areas, including now tier 2 and tier 3 cities, and not just NYC, DC, and SF?

Look at our population growth. In the 'good times' of the 1960s, we had 180M people. Now we have double that in two generations, or the difference between Boomers and Millenials approximately. In 1960, places like SF and Arlington, VA weren't rural farmland, they were still urban areas. We now have higher density in the large cities due to jobs having moved there, so we probably have 3x the number of people desiring homes in the same area as we had in 1960.

And families are smaller now. In 1960, you'd have a family of 5 in one house. Now you need two houses for the two 2.5 / person families.

So essentially we've probably got 4x the demand for the homes close to working centers, along with rising base prices due to far more women in the workforce. Add perpetual low interest rates, underreported inflation, and I'm surprised houses aren't at SF levels in every city yet.

https://en.wikipedia.org/wiki/Demographic_history_of_the_Uni...

Many of those cities are only in the last few years returning to their peak populations. They certainly aren’t more dense, but there are fewer units of housing available now. In many places lots of housing was torn down, or multi family homes were turned into single family homes.

The cost is directly related to the fact that it is defectors illegal to build new homes in the most economically vibrant zip codes.

This is a great point.

Go back to the 70's, San Francisco was losing population. By the 90's it had dropped from a peak of 775K (1950) to 670K (1980). It's now ~880K, so only 14% higher than 70 years ago.

> It will not crash

Homeland wars do amazing things to economies.