> anybody, in any market, would prefer to make luxury units. It really depends on the market. Builders aren't stupid. If there's no one willing or able to pay

> anybody, in any market, would prefer to make luxury units. It really depends on the market. Builders aren't stupid. If there's no one willing or able to pay for granite countertops they won't spend the money putting them in. They will build luxury units if they are profitable, otherwise they'll build cheaper ones that they can let out. Alternatively you might get a building boom where everyone overbuilds luxury units and prices collapse. Either way, win-win for consumers. > Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses? You have to consider: 1. It's easy to ramp up (and down) car production, but not so much for housing. If carmakers had restrictions on how many cars they could produce every year, there's a good chance they too would try to focus on the higher-margin market. But because they are allowed to build without restrictions, they produce something that's affordable to every segment. I'm not saying "build baby build" because real estate is different from cars. But the current regime in the Bay Area is way too far in the other direction. It's like the government saying no one can build any new cars at all for multiple decades. Software engineers making $200k/year would be driving 15-year-old Corollas with the hubcaps falling off and Bill Gates would have the only Tesla in private hands (I'm exaggerating obviously) 2. There actually is (in a way) trickle-down at work in the car market: used cars. Used cars add to the supply of cars on the market, keeping prices lower. A lot of used car buyers are lower-income people who may pay cash because they don't qualify for financing on a new car, or because it may be financially ruinous for them to go into debt on a depreciating asset. 3. Much of the intrinsic value in real estate is in the location and the land. Whereas for a car most of the intrinsic value is in the design, marketing, quality of parts, engineering etc. Where an apartment is located determines how much it will rent for to a much greater degree than the quality of the apartment (assuming basic livability standards are met). $700k will buy you a burned-out 1-bedroom house in San Francisco or 2 spacious 3-bedroom houses in suburban Houston. Why? Because of where these dwellings are located.