“Prices return to normal” may be relevant to some places but many other places remain over-valued. Weather and other factors may have some bearing, but that is not the whole story. Neither is it just about the culture surrounding home ownership. There are some generalizations such as housing bubbles occur predominantly in the English speaking world. That points to the relationship between banks (and central banks), governments, and industry but those vary within the English speaking world. Psychology plays its part. Lust and fear make people irrational, but I don’t think that is peculiar to the Anglo gene, if such a thing exists. Social and economic factors play some role here. The causes of the bubble are complex, and the aftermath equally complex. Research indicates low interest rates do have a delayed affect on prices, but supply more so. However, this still doesn’t explain the often large regional disparities. Desirability, supply, incentives, ownership culture, institutional culture, and psychology are all in the mix and interact with each other. It is interesting that from many of the responses above Piggs seem happy with their lot. But that may be due to the demographics of Piggs. I wonder what the broader consensus is?
