[pascalxus]

Yes, there are still many areas with a lot of potential to get worse.

but there are certain areas that can't go much higher and sooner or later each area will reach a price point where prices can't go any higher. Ultimately, it just depends on how much people can afford to pay: which comes down to salaries, commute distance and # of wage earning people per roof. Sooner or later all the coping mechanisms will be exhausted.

The bottom line is, RE prices can't outpace salaries forever. If you double the number of wage earners per roof, you can double the RE price. But, after that it becomes harder and harder, as people aren't willing to live with multiple families per house.

[mdorazio]

Don't discount the impact of investors who have no intention of living in their owned real estate, though. For these individuals, there is no salary or commute distance factor to consider, so price sensitivity is very different. Thanks to globalization this is an increasingly large factor in rising real estate prices. See cities like Vancouver as an example.

[philwelch]

Except, in order to profit, the investors have to eventually sell or rent the homes to actual residents, who would have to worry about salaries and commutes. Otherwise it's just a speculative bubble.

[jjeaff]

Do they? Lots of homes in places like BelAir sit empty, visited once or twice a year. Either as status symbols or a place to hide I'll gotten gains.

[philwelch]

BelAir is also a desirable place to live--at least if you're rich--which means eventually the homes can be profitably sold to an actual resident. (And part-time residents are still residents.)

[rmrm]

just wanted to add - the cost of debt and the desire to take on debt, and the laws around mortgage debt, also play a large role.

[jjeaff]

The recent decrease in the mortgage deduction will likely have some effect.