I think you have a very good point. If long-term interest rates stay low (that’s a big macroeconomic if, I know), and rent inflation continues to be high, then equilibrium home prices could be substantially higher than in the past. Actually, this issue has been discussed at length on some threads a few months back. Look for a thread called “Reversion to the mean” by PS, and another thread (don’t remember the name) that prompted PS to start “Reversion to the mean”. Needless to say, there was no consensus on this rather tricky issue. My point of view is probably close to yours (we’re overpriced today, but won’t go down to price/income of 8 anytime soon, if ever).
