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Housing prices can increase faster than wages/inflation, that just means that the share of wages spent on housing has to increase. This can continue until nobod

Housing prices can increase faster than wages/inflation, that just means that the share of wages spent on housing has to increase. This can continue until nobody has discretionary money left, since shelter, being an essential part of life, has very inelastic demand. Every step of that is awful, of course, but nothing disallows it from happening. And indeed, if you compare trends in wages[1] and home prices[2] you'll see two lines that don't look like they know each other. (I pulled the first two graphs I found, if someone wants to go get wages and home prices and index them by the same inflation metric that'd be awesome.) [1] https://en.wikipedia.org/wiki/Household_income_in_the_United_States#/media/File:U.S._Hourly_Wages_-_Real_or_Adjusted_for_Inflation_1964-2014.png https://en.wikipedia.org/wiki/Household_income_in_the_United... [2] https://commons.wikimedia.org/wiki/File:Median_and_Average_Sales_Prices_of_New_Homes_Sold_in_the_US_1963-2010_Monthly.png https://commons.wikimedia.org/wiki/File:Median_and_Average_S...

Ericson2314 7y ago
Yes this is true and important, but you and the parent poster probably agree. "in the long term" i.e. asymptotically is constrained by "nobody hav[ing] discretionary money left", hence the OP's conclusion. Now ROI and asymptotic analysis are both mathematical niceties the belie real world limitations, but that's how people talk.
pascalxus 7y ago
Yes, but you can never spend more than 100% of your income as long as your income is your primary means of obtaining money. In fact, I think most people would have a hard time spending more than even 65% of their income on housing. Now, I can imagine an exponentially distopian world where 4 families are forced to live in a single house. In such a world, housing prices could rise faster than wages/inflation for quite some time, but not forever. There's only a finite amount of space inside a house. And at some point, you will run out of cubic feet of space (if disease and pestillence doesn't kill you first). In the infinite long run, those prices will only be able to increase as much as wages as long as wages remain the primary source of money.
- luckylion 7y ago
  > I can imagine an exponentially distopian world where 4 families are forced to live in a single house. Have you seen Hong Kong cage homes? You're right that there is a limit, but we're far from close to it.

Ericson2314 7y ago

Yes this is true and important, but you and the parent poster probably agree. "in the long term" i.e. asymptotically is constrained by "nobody hav[ing] discretionary money left", hence the OP's conclusion. Now ROI and asymptotic analysis are both mathematical niceties the belie real world limitations, but that's how people talk.

pascalxus 7y ago

Yes, but you can never spend more than 100% of your income as long as your income is your primary means of obtaining money. In fact, I think most people would have a hard time spending more than even 65% of their income on housing. Now, I can imagine an exponentially distopian world where 4 families are forced to live in a single house. In such a world, housing prices could rise faster than wages/inflation for quite some time, but not forever. There's only a finite amount of space inside a house. And at some point, you will run out of cubic feet of space (if disease and pestillence doesn't kill you first). In the infinite long run, those prices will only be able to increase as much as wages as long as wages remain the primary source of money.

luckylion 7y ago
> I can imagine an exponentially distopian world where 4 families are forced to live in a single house. Have you seen Hong Kong cage homes? You're right that there is a limit, but we're far from close to it.