This is the crux of the matter. The market always seeks equilibrium. If there is an income advantage in one location, people will move there, driving up costs in the process, until the point that there is no longer an advantage. Certain cities have held an advantage in earning ability for quite some time and the market is attempting to correct that disparity by increasing costs.
People complain about how expensive these homes are, but in reality they are the cheap ones! The low dollar value homes out in the middle of nowhere are truly the expensive ones. Like you mention, the profitability in a high cost city outpaces the profitability elsewhere, even after you consider that your costs are lower. If the lower paying job, but also the lower expenditures, provided a higher income there would be absolutely no hesitation to take a 'mcjob'.
The question is: At what point does the 'mcjob', where housing is low cost, actually provide – after accounting for costs – a higher income and become the more desirable type of work? That is when housing in the high-priced cities will stabilize, as there is no longer the financial advantage to live there. Until then, expect price to continue upward.
1. Community A provides revenues of $30,000 per year, and expenses of $20,000 per year, with an income of $10,000 per year.
2. Community B provides revenues of $100,000 per year, and expenses of $50,000 per year, with an income of $50,000 per year.
Naturally Community B is going to be the more appealing option. But if housing costs (among others, but housing is the topic at hand) keep increasing in Community B, at some point you might find your expenses at $90,000 per year, leaving an income of $10,000 per year. Exactly the same as in Community A. At this point there is no income advantage in either location.
Assuming you live in Community B, until your income is reduced to that of Community A it is worthwhile for you to spend more and more of your revenues on housing to keep a good thing going. Even if your expenses rise to $80,000/year in order to stay in Community B, it is still a good deal. Your income is still double that of Community A.
But the market always seeks equilibrium. While corrections take time, eventually your Community B income will have to fall to the same level as Community A to eliminate the income advantage. As we discussed earlier, as long as one place has an advantage, people will move there and compete for resources (i.e. drive up costs) in the process until the advantage no longer exists.
And this is why certain markets are seeing incredible housing price growth. The market is correcting such that your your six figure developer salary in San Francisco provides the same income as working at McDonalds in Detroit.
Eh... when the housing market corrected in 2008, it could have settled at a lower baseline but it was politically urgent to make sure that baby boomers could still on their houses as profitable investments.
I think they kind of can be largely blamed, but probably not for the reasons most people would think of.
Strict zoning laws is not an issue, shit zoning laws is, especially exclusive ones (though I have no idea what zoning laws the bay uses). Zoning laws are just a way to define what can be mixed in areas, the US have notoriously garbage ones (often exclusive, overly complex and hyperlocal) but it doesn't have to be that way: http://urbankchoze.blogspot.be/2014/04/japanese-zoning.html
That's a pretty broad brush. The world really doesn't revolve around a few coastal US cities.
No shit. This article is the 1% dodging pitchforks.