| > fought hard to keep the mortgage interest tax deduction I think this tax deduction is insane, but it's notable that this kind of deduction on interest doesn't exist in Canada and other western countries, but we have in many cases far far worse housing price inflation than the US. So it's not really the culprit. It's really very simple. When people are buying a home, they are really buying a loan, not a home. 9/10 home buyers buy the home to fit the maximum loan the bank will approve them for. 15 years of insanely low interest rates means demand for those loans was crazy high, so the price of the thing that backed the loan -- the property -- also skyrocketed. Yes the tax break in the US likely worsens that, but it's certainly not the explanatory factor on its own. A large percentage of home buyers have no ability or intent to ever fully pay out their mortgages (and standard "financial advice" during low interest times was not to bother). So the commodity you're "buying" is not a house, but the loan itself, a long term rental arrangement with a bank. Now that rates are returning to normal levels, I hope to see that level out or fall. But there are strong lobbying pressures to prevent that. There's a whole generation that sees interest rates lower than 5% as normal/expected. Which is pretty crazy, really. Capital gains exemption on primary residence probably also plays a role. I personally think that exemption should only apply on a portion of the resale value below a certain threshold. That would help put a downward pressure on price inflation. But the core problem is that there is the most powerful voting demographic explicitly does not want this. Most baby boomers and much of the middle class are relying on the $$ in their properties to retire, because western countries have on the whole dismantled the concept of pensions and a financially secure retirement. |