I make 5x the median wage in my county and my county has the second highest wage in the US.
I see all these $M houses being sold left and right and I'd never feel comfortable buying a $M plus house. What gives?
If prices on an investment rise more than inflation 90% of the time why wouldn't you buy it?
https://lginform.local.gov.uk/reports/lgastandard?mod-metric...
Prices seem silly to me here too (Australia) but a lot of it seems to be a combination of the perception that house prices just always go up, so you have to "get on the ladder" as they say and trade your way along. Each step doesn't seem to be a huge investment in itself. If you don't hop on, then you get left behind.
But tax law here also makes loss-making investment properties attractive to people, and borrowing against equity is another thing. Interest-only loans (as interest is a deductible investment expense), plus other expenses (all the better if it's in a nice holiday destination so flights and hotels to "inspect the property" are deductible), resulting in a minor loss on rent, which is offset against your primary salary and other investments.
Negative gearing like this allows people to basically zero out a house on the balance sheet and move on to buying another. Let it appreciate for a few years and you're ahead. Be a major voting base and politicians won't dare ruin your gravy train.
If you don't have significant capital in investments, you're getting hosed.
Reality will disagree at some point.
According to the estimate-o-matic tools, the house I'm in is worth about 425k. There's basicaly nowhere in this market I could take 425k and get a house meaningfully bigger or better. Not in the new-developed neighbourhoods where the maps say "eventually a grocery store is planned, but until then it's a 10km drive", not in old neighbourhoods where it was built in the 70s and the floorplans top out at 1500 square feet.
I've been trying to sell my family on the Rust Belt, but so far no dice.