steadyeddy wrote:Scooter57 wrote:Baloney!
Your house price is rising only because people are being offered ridiculously low mortgage rates. When rates rise--as they are certain to do within the next decade, it will take more income to afford the same priced home and your home's value will drop to where people in your region can afford itl
Interest rates do play a role in affordability, but they are only one slice of the pie. If interest rates rise while unemployment falls, will housing prices go up or down? In my own area, vacancy is below 3% and rents are increasing dramatically faster than income. At least in the short run, people will not move out of town or become homeless--they will simply allow housing to take a larger share of their income. Healthcare and education are examples of other sectors that have seen prices outpace wage growth recently with little effect on demand.
If you wiki 'Baumol's Cost Disease' you'll get a good explanation of what happens in higher ed and healthcare.
Housing it is the lack of substitution. If your good paying tech job is in Silicon Valley, cheap good housing in Texas is irrelevant to you. If you work in tech or the securities industry, then you work in the Bay Area or in New York (or Boston or Chicago to a much lesser extent). Probably more than half the tech company jobs in USA are in the Bay Area.
So you are right. If people have jobs and incomes rising, then they will push affordability to the limit to live in a good area, with good schools, relatively close to work. That's why per square foot on the Upper West Side of NYC you probably pay over $2000. Central London you can pay USD 5000.
Interest rates has an impact, but it's not the only factor.