I love this, but it missed out one factor: the banks.
Mortgages before the 80's were tied to your income, and for most households that was a single income. House prices couldn't rise beyond a fairly low point because no-one could get a mortgage for them.
Then in the 90's this broke two ways: most households had 2 incomes as the norm became that married women also worked, and the banks started giving mortgages on much higher ratios, leading to the 100% no-deposit mayhem of the early 00's and eventually to 2008's crash.
We will spend as much as we can on a house. If you lend us 3x our salary, we'll buy the best house we can with that. If you lend us 10x our salary, we won't sensibly buy a house that costs 3x our salary, we'll buy the best house we can find for that 10x loan.
House prices are therefore free to rise spectacularly fast, as they did, because any dip in supply leads to price increases. Until we're here, where no-one can afford to buy a house unless they have a house to sell.
Hence in many countries in Europe, e.g. in the Nordics, there's one simple way to gradually reduce prices: reduce the supply of mortgages for more expensive housing. The state backstops most mortgages, but by the same mechanism (or with the help of the banking regulator) also sets the rules on how to give them. When prices get too hot, the regulators simply decrease, or refuse to increase, the nominal amount of the max mortgage you can get with the state's support, and/or the maximum allowed mortgage repayment as a percentage of your monthly income (in a stress-test at 6 % interest rates). Lowering the demand immediately pushes down housing prices; regulators stop when prices are down 15-20 % so that the banks avoid losses.
This is possible in the USA too, given nearly all mortgages are federally supported.
This wasn't some accident of demographics though but a specific objective achieved by the banks in the late 70s and early 80s, as documented in Liar's Poker.
They had to push congress hard to do something they knew was dodgy, that is, secuiritizing mortgages. The quid pro quo was the mortgage interest deduction, but even that is correctly seen as a subsidy to banks. Indeed if the government really wants to "help homebuyers", why only support the debt part?
By the end of the 80s this mess was already in full swing.
Mortgages before the 80's were tied to your income, and for most households that was a single income. House prices couldn't rise beyond a fairly low point because no-one could get a mortgage for them.
Then in the 90's this broke two ways: most households had 2 incomes as the norm became that married women also worked, and the banks started giving mortgages on much higher ratios, leading to the 100% no-deposit mayhem of the early 00's and eventually to 2008's crash.
We will spend as much as we can on a house. If you lend us 3x our salary, we'll buy the best house we can with that. If you lend us 10x our salary, we won't sensibly buy a house that costs 3x our salary, we'll buy the best house we can find for that 10x loan.
House prices are therefore free to rise spectacularly fast, as they did, because any dip in supply leads to price increases. Until we're here, where no-one can afford to buy a house unless they have a house to sell.