I think the cause of with out of control home prices is low interest rates. Often, people buy the biggest house they can afford, the lower the interest rate, th

I think the cause of with out of control home prices is low interest rates. Often, people buy the biggest house they can afford, the lower the interest rate, the more they are willing to pay. As the interest rate fell from 14% in 1981, to roughly 0% today, and mortgage rates fell from ~20% to ~4%, people could afford to pay more and more, comfortably or otherwise, for their homes, and because often people buy the biggest house they can afford as a proportion of their monthly income, the maximum people can pay will continue to rise as interest rates fall. This drives house prices upwards. As house prices rise upwards, all homeowners will have increased equity-debt ratios, giving them additional collateral to further pledge their houses to increase the amount they can borrow to spend on more properties. It is a pro-cyclical effect on house prices.