And then you have the psychology of high prices: if everyone is brainwashed and self brainwashes themselves, an entire city self brainwashes itself that its property is oh so valuable, they remain high no matter what, look at London, crazy prices from any point of view, or any European city for that matter especially Rome and Madrid etc. And then you have international funds, investors who have trillions of dollars and end up simply pumping up the value of real estate in London, New York, San Francisco, Moscow etc. so they use their cash as a weapon against everyone who is not rich and so forth.
And of course there are all kinds of power struggles, feedback effects, a lot of people live off rents being paid for their property, and they have the same interests of rich investors, keeping home values high, companies create jobs in hot areas like San Francisco and let prices go through the roof by imitating each other (pray tell me, how can any chunk of cement or chunk of wood, a piece of cement or wood, etc. since a house is just a box of wood or cement, simply a box to live in) be worth 500,000 dollars in San Francisco and 50,000 dollars in Florida ? actually the one in Florida is even bigger and nicer and has a swimming pool ad so forth.
So it is all a variable, all a wild number a society decides to impose upon itself, it is a way a society self punishes itself, a way to make a society beat itself up by this real estate war and so forth.
So they say that home prices going up is good for the economy: how on earth can anyone say this seriously ? and yet it is what everyone says and believes in.
I say that it is much easier for fake high home prices to come crashing down than it is to pump them up, it is easier to go Detroit than the other way around: after all the prices going up is a make believe bubble, only due to a dominating psychological and cultural artifact that can change course very quickly never to go back up again.
Now Shanghai, or Sao Paolo Brazil tomorrow Mexico City or Saigon or Hanoi will become the mega hot spots, go pump the prices up in those cities and so forth, the cities with high economic growth expected (and pray tell me what is the difference between economic growth and simply home prices growing ? the same thing ? home prices punish those who can’t afford it).
Of course New York City, Los Angeles, London, San Francisco will forever be considered hot spots and will always have high home prices, how I wish they would crash and collapse like a brick in all of those cities, they should all go Detroit, 10,000 dollars for a nice 4 bedroom home!
Of course the theory goes that a home is worth the area it is placed in because the area offers good jobs and so forth: but if companies are always restructuring, cutting costs, changing and technology is always changing everything who will gaurantee that an area will always be a hot spot ? another bet on the future, another risk and so forth, so the home you paid 300,000 dollars for may be worth 50,000 dollars in 20 years if all the companies in an area find a way to cut costs, and fire everyone…
And then you have the cases like Madrid and Rome that have zero economy, no possible future growth and home prices that are frozen sky high: of course the banks and the people in those countries will have to wait a long time to finally wake up and realize they live in third world dumps with zero jobs prospects before those prices collapse like crazy, the sooner the better!