Why are home prices so high?

Question

Why are home prices so high despite......

• Record low homeownership not seen since the early 90's at 63.7%
• Income and median household price disparity is greater now than in was in the housing crash
• Per the case shiller index, the 20 city average is only 11-12% away from the July 2006 high

What am I not seeing here? It seems as if home prices are inflated due to short term low supply. Why have builders not caught up?  What will happen when they do? Are we investors the cause of a mini bubble this time?

Frank Jiang · Answer

Look at your points from the other side:

This means there's a ton of prospective home buyers available, driving up demand.  Studies show that most millennials want to own homes eventually and they are only just now getting to a place in their lives where they are able to.

Research shows that income increases at the high end of the income spectrum can increase prices for lower end homes.  http://www.nber.org/papers/w12331.  This makes intuitive sense as people/institutions with high incomes are buying property for investment.

Comparing to previous highs isn't terribly relevant, in my opinion.  Where the current market peaks out is not determined by where the previous peak occurred.

Kalo (Kyle) Atanasoff · Answer

One thing different than 10 years ago - people have much more savings and liquid assets. They are looking to put the money works for them. And now, since the stock's market is not very reliable ( or i would say it reach out his current maximum potential) than real estate as a type of assets is very attractive. And do not forget that the money are still cheap (low interesting rate)...