[cryptonector]

The cost to the consumer of buying a house is probably higher than it would be without these incentives, actually, because it ends up causing more money to spill into real estate.

It's the same with college costs: every additional dollar of federally subsidized loans made available to the public adds a dollar to the cost of college, almost necessarily so.

[zimablue]

You've mixed up two things here I think.

Returns vs Cost of buying a house.

The point is that the government subsidies make the profits on buying real estate high, which leads to high prices.

So both are true: "high cost of buying a house" "high returns on real estate"

Obviously they can't be true forever, the upper limit I guess is the ability of the lower classes to rebel divided by their tolerance of being priced out of their own land.

[kbutler]

The grandparent was describing the long-term vs short-term effect of broad subsidies.

The short-term effect of a subsidy is a reduced cost to the consumer.

If subsidies are generally and persistently available, this reduced perceived cost increases demand, causing increased prices. The ratio of price increase to amount of subsidy (and thus whether the consumer or producer benefits from the subsidy) will depend breadth of the subsidy and on elasticity curves of supply and demand.

Then there's the increased demand because the subsidy increases ROI. further increasing prices of the fixed input (land/existing housing) to the good (living space).

[cryptonector]

Thank you. That is roughly what I meant to convey.

Mind you, because these subsidies are never really temporary, I suspect the immediate effect on prices is always to raise them. And perhaps even temporary subsidies cause price rises just by increasing demand, though the price rises might only be temporary.

[cryptonector]

I was... responding the last sentence of the parent.

All economics and human societies, really, are bubbles. Very, very long-lived bubbles. Obviously growth on Earth is ultimately limited, so yeah, these very long-lived bubbles cannot go on forever. The real trick is to predict when any one bubble will burst!