The housing prices that are spiraling out of control are those which are being driven up by the increasing wealth of the upper-1% to 10%. The price of housing in Krupp, WA isn't inflating at all. The price of housing where software developers and people in finance and business and industry, and the places where people like to buy second homes is inflating.
And it is just supply and demand, and you've addressed supply but what is driving so much demand, and why do participants in that market have so much more money to be bidding up prices.
And looking at inflation in different targets of money is something that economists do all the time when they divide inflation up between CPI and core CPI ex-volatile commodities. This is just looking at the things that rich people buy and the inflation in those things versus the inflation in the broader economy. We know the rich are getting richer, the gini coefficient keeps on getting more skewed, and the things that rich people buy are getting more and more expensive. You can't call this "inflation" though because economists object because they invented that term and they'd prefer to call it asset bubbles. But cantillon effects describes it a bit better. They're capturing more of the gold and prices are rising in the things that they use it on creating skewed effects in the rise of prices in the economy.
> And it is just supply and demand, and you've addressed supply but what is driving so much demand, and why do participants in that market have so much more money to be bidding up prices.
This is something a quick visit to Wikipedia will explain to you. [1]
> Since the 1960s, San Francisco and the surrounding Bay Area have enacted strict zoning regulations. Among other restrictions, San Francisco does not allow buildings over 40 feet tall in most of the city, and has passed laws making it easier for neighbors to block developments. Partly as a result of these codes, from 2007 to 2014, the Bay Area issued building permits for only half the number of needed houses, based on the area's population growth. [1]
They literally built half as many houses as needed.
> ... and why do participants in that market have so much more money to be bidding up prices.
That would be because of the number of high-paying jobs added in the Bay Area.
> At the same time, there has been rapid economic growth of the high tech industry in San Francisco and nearby Silicon Valley, which has created hundreds of thousands of new jobs. The resultant high demand for housing, combined with the lack of supply, (caused by severe restrictions on the building of new housing units) have caused dramatic increases in rents and extremely high housing prices. [1]
Remember, these are outliers as on average across the US, on an inflation adjusted basis, the $/sqft price of housing has not budged since the 1970s. However, zoning rules left the average new house twice as big outside of metros, and regressive policies in metros skewed the supply side of supply and demand.
Thing is, I'm frustrated because you're right to be mad but pinning this on the Fed is pissing into the wind. Put the blame where it's due: deregulate housing construction. Allow supply to grow to meet demand. It's not rocket science.
The only thing the Fed has done to raise the price of houses is decrease interest rates. A drop from 5% APR on a 30-year fixed to 2.5% APR means for the same monthly payment you can afford a house 25% more expensive. Fundamentally however this didn't change the affordability of housing for the borrower class.
The cantillon effect may account for some subset of this wherein wealthy borrowers with easy access to capital are able to take advantage of the lower price of housing (before bid up) and also the lower interest rates. However, I've found zero quantification of this.
And it is just supply and demand, and you've addressed supply but what is driving so much demand, and why do participants in that market have so much more money to be bidding up prices.
And looking at inflation in different targets of money is something that economists do all the time when they divide inflation up between CPI and core CPI ex-volatile commodities. This is just looking at the things that rich people buy and the inflation in those things versus the inflation in the broader economy. We know the rich are getting richer, the gini coefficient keeps on getting more skewed, and the things that rich people buy are getting more and more expensive. You can't call this "inflation" though because economists object because they invented that term and they'd prefer to call it asset bubbles. But cantillon effects describes it a bit better. They're capturing more of the gold and prices are rising in the things that they use it on creating skewed effects in the rise of prices in the economy.