Housing prices follow pretty straightforwardly from incentives. Savers have counter-parties who owe debt. After the federal government ($19T), the next biggest is mortgages, with $14T, of which $10T is one-to-four family residences.
Whether it's direct ownership of debt or intermediated through pensions, insurance companies, or banks, saving for retirement is largely done through putting others in debt. More people savings more aggressively means money gets cheaper until the market clears. Cheaper money means you can finance higher bids on assets prices such as homes and university educations.
I have no idea how to fix it. I don't even know if it's possible. Making housing cheaper on a national scale means nuking pensions as people walk away from underwater mortgages. Probably the best bet is to inflate away these nominal obligations, but that has its own host of issues with screwing over retirees. Between lowering birth rates and improving health care, we as a society have been steadily ratcheting up the percentage of our economic output going towards supporting retirement. That's not sustainable when combined with how we've been also ratcheting up our standards of living. These trade off against each other, and it feels to me like the Boomers chose "both, but our kids pay for it".
Whether it's direct ownership of debt or intermediated through pensions, insurance companies, or banks, saving for retirement is largely done through putting others in debt. More people savings more aggressively means money gets cheaper until the market clears. Cheaper money means you can finance higher bids on assets prices such as homes and university educations.
I have no idea how to fix it. I don't even know if it's possible. Making housing cheaper on a national scale means nuking pensions as people walk away from underwater mortgages. Probably the best bet is to inflate away these nominal obligations, but that has its own host of issues with screwing over retirees. Between lowering birth rates and improving health care, we as a society have been steadily ratcheting up the percentage of our economic output going towards supporting retirement. That's not sustainable when combined with how we've been also ratcheting up our standards of living. These trade off against each other, and it feels to me like the Boomers chose "both, but our kids pay for it".