"Supply and demand" is the obvious answer, but it doesn't answer the follow-up questions: what's fueling the demand, or lowering the supply? The answer to those

"Supply and demand" is the obvious answer, but it doesn't answer the follow-up questions: what's fueling the demand, or lowering the supply? The answer to those is: easy borrowing, and foreclosure stickiness. Actually, easy borrowing fueled the demand in the past, and the bubble is still deflating, slowly because of foreclosure stickiness. If people had to pay cash for houses I'm confident house prices would be half or less of what they are today, in most areas. If banks got rid of their non-performing mortgage loans in short order, I'm confident that would cut house prices in half in most areas. House prices are also a hot political issue; namely, each generation wants future generations to pay excessively for their houses when they retire, so they support the gov't borrowing heavily to fuel house prices. (Of course they want future generations to pay for the gov't debt too.) Improved robotics, materials and whatnot will have limited effect on house prices. A lot of the savings would be absorbed as greater profit for construction and renovation. You see this happening in the pre-fab industry. For the next decade at least, nothing beats buying an existing house, financially. Most houses in the US are selling for less than replacement cost.