Every step of that is awful, of course, but nothing disallows it from happening. And indeed, if you compare trends in wages[1] and home prices[2] you'll see two lines that don't look like they know each other.
(I pulled the first two graphs I found, if someone wants to go get wages and home prices and index them by the same inflation metric that'd be awesome.)
[1] https://en.wikipedia.org/wiki/Household_income_in_the_United... [2] https://commons.wikimedia.org/wiki/File:Median_and_Average_S...
Now, I can imagine an exponentially distopian world where 4 families are forced to live in a single house. In such a world, housing prices could rise faster than wages/inflation for quite some time, but not forever. There's only a finite amount of space inside a house. And at some point, you will run out of cubic feet of space (if disease and pestillence doesn't kill you first). In the infinite long run, those prices will only be able to increase as much as wages as long as wages remain the primary source of money.
Have you seen Hong Kong cage homes? You're right that there is a limit, but we're far from close to it.
Now ROI and asymptotic analysis are both mathematical niceties the belie real world limitations, but that's how people talk.
I don't think this is true at all. Prices can outstrip wages easily when there's a large influx of new inhabitants, either through a high birth rate or through migration. See London over the last decade for an example. It's less common to see this effect in entire countries because it would take a vast number of people, but I do think it could happen.
Prices can continue to rise if mortgages become cheaper to service: as we've seen over the last thirty years, declining interest rates and lengthening mortgage terms push up the price of houses.
Prices can also rise if there is sustained outside investment - for example wealthy people outside the country looking for somewhere safe to stash their money (see London again).
OF course, all of this is contingent on what exactly you mean by "the long term". But the UK has seen a sustained boom in property prices for a generation. That seems pretty long term to me.
Places can become more or less desirable to live in - all this talk about matching inflation rates etc. is about the housing market as a whole - average. If you bought in a bad neighborhood and suddenly the neighborhood gets renovated and richer people start moving in - your property can increase in value multiple times over what you paid for it initially. If your area has excellent job offers and limited housing supply you will see housing prices increase because more people with more income will come to that area to work there. The problem happens when the local job market hits a slump and you assumed the demand increase will fuel the growth to cover your investments.
Of course, others I know have also lost substantial value at times.
I don't think this is true at all. Even the nature of "desirable" land has changed drastically over the last few hundred years. There's no reason to think that change won't continue to happen. Especially given the rise of internet, climate change, and the necessary decarbonization of our economy, what's "desirable", it's ridiculous to think where people want to live is fixed.
1. Cheap shipping via navigable rivers 2. Deep water ports 3. Not subject to periodic flooding 4. Flatness (not a huge deal, but it does make construction cheaper) 5. Soil suitability for construction (especially relevant is where the bedrock is, and what kind of soil lies atop it)
Granted, a lot of this is merely the reason why network effects got started where they did. But they are still highly relevant considerations that add completely natural value to land, regardless of what people would decide to do with it.
Note also that your "uhh" is something many people find objectionable. E.g. https://web.archive.org/web/20070105163441/http://www.televi... with more discussion here: http://languagelog.ldc.upenn.edu/nll/?p=28802
Granted, the risk-free rate doesn't have to be above-inflation, but the real interest rate currently is positive in the US.
inflation or wages within the pool of people eligible and willing to buy said housing. So you get weird distortion when housing is bought up by folks not actually living in them (foreign ownership, and kind of speculative buying)
This assumes the lack of a bubble created by anti-competitive regulation, like SV's cap on new development.