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Comment by duderific | Hacker News Reader

There is nothing artificial about the real estate "bubble" in the Bay Area. Prices are set by supply and demand, both in salaries and real estate.

Real estate prices are high, because the Bay Area is a very desirable place to live, there are people who can and will pay the high price, and the supply of housing is low.

Salaries are high because big companies are fighting for talent (demand), and the supply of talent is low.

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The thing that makes it a bubble is that the supply is artificially constrained by local zoning laws. Eventually people will be fed up with the situation and they'll vote for a government that'll allow more development, at which point housing prices will plummet.

> Eventually people will be fed up with the situation and they'll vote for a government that'll allow more development, at which point housing prices will plummet.

Clearly you don't live in CA. Homeowners vote more than renters, and they will never intentionally vote for policies that will put them underwater on their own mortgages.

This is one of those bits of common wisdom that falls into the "it's more complicated than that" territory. Zoning laws are a contributing factor, but they are far from the only factor -- and it's a stretch to say that they're the deciding factor. Zoning is an issue. Rent control is an issue. Basic supply and demand is a huge issue that arguably outstrips regulatory roadblocks. Regional geography is also much more of an issue than people sometimes think.

Housing prices here are likely to stabilize, but they're not going to start seriously declining unless the job market starts declining, too.

All those other reasons you mentioned are contingent on zoning. Allow highrise apartments anywhere in the Bay area and just watch how fast the buildings go up and the rent goes down.

It is artificial in the sense that there really isn't a good reason why the supply shouldn't be going up.

You missed last week - available housing stock has started to grow.

Yes, it is finally leveling off after years of extreme increases in prices. Demand has cooled as mortgage interest rates have crept up.

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