Considering how crazy expensive accommodations have become the last couple of years, concentrated in the hands of greedy corporations, landlords and how little politicians seem to care about this problem, do you think we will ever experience a real estate market crash that would bring those exorbitant prices back to Earth?
Fate will decide whether we see this in out lifetime, and it will depend a lot on where you live. Several factors affect these prices, and I probably don’t have an exhaustive list but here are some.
There is the boomer bubble. Boomers possess most of the houses. When they die, a lot of house will enter the market. Fortunately for us, heat waves and pandemics should accelerate this process.
There is the financial bubble. Housing earns money, and all actors ensure it stays this way. To solve that, you need to kill housing as a finance product. The most effective solution (and I think the only effective solution) would be ceiling to location prices. And with that, forbid, through taxes or rule, empty houses. Let the landlords deal with market shit. This would instantly crash the market, which is an excellent thing for everyone but people who rent houses or plan to sell their house.
There is the actual market: we usually need more houses, but building too fast would crash the market. So if you let building to the market, it will never build enough for prices to go down. You need a government that will force construction. You also need laws or taxes against empty houses.
A note on empty houses: it is a very important factor because it allows landlords to control the market by removing or releasing houses on the market. The only empty houses that should be allowed should be for repair or hostel.
There is the globalisation, especially planes. Planes make connected cities kind of neighbours, which means their house prices will become similar over time. This means that changes in plane traffic, laws or airports can affect local housing market. It’s not such a big deal though.
There is probably more to say about finance. Loans are probably a factor too, but I don’t know enough of it, and what I say in the finance part will affect it too, an probably in greater proportion.
Tl;Dr is simple : you need a brave government to apply simple and known solutions to the problem. Landlords will be ruined and that shouldn’t be a concern but that will probably be the reason why nothing will be done.
Oh I need to add a note about boomers because it’s interesting now that I think about it.
The thing is that post ww2 capitalism had it that the dream for workers would be to get a work that allow them to buy a house, maybe a second one, and live a good life for that. It worked well, but like all capitalist dreams it was pyramid scheme that ends with us.
That’s why most politicians won’t do shit about it: it’s the core of the American/capitalist dream. It is also why most boomers will never believe or accept any solution to the problem: their whole life was built on this, and now rely on this.
A lot of boomers are also occupying homes much larger than necessary. I live in an older suburb of 1950s houses so its a mix of older people and younger families. Of my immediate neighbors at least 12 of 30 homes are single old people or couples living in 3 or 4 bedroom homes with yards. These are good neighbors because they are quiet and rarely seen but completely wasting space that families could be living in.