Maybe treating housing as an investment was a mistake

Investment return on housing should have been on the first sale or through rental, and that's pretty much it

But then the main issue with real estate prices is the limited supply side, which for the most part has no reason to be

The biggest real world advantage for the average person for buying a house is forced savings.

If a mortgage is $3K and rent is $2K per month, Joe Sixpack is not going to save $1K in a sinking fund. He’s going to spend some extra non-zero portion of that money. So in the long run, for average real consumers, not a theoretical economically minded consumer, a mortgage forces frugality.

> Meanwhile, renters are desperate. They’re begging for housing prices not just to slow, but to fall.

I have a friend who is a head chef at a decently popular bar and restaurant on Broadway in Capitol Hill, Seattle (very trendy part of town if you aren't familiar, steep commercial rent). He lives in a 400 sq ft studio and is barely, barely making it from one paycheck to the next. I am sitting on a 2.6% interest rate mortgage and my prices are set for the next 30 years. I probably work half as hard as he does, if not even less than half. I have a lot of cognitive dissonance associated with that.

China has an enormous amount of housing. Their prices are still sky high

> While the rich are more likely to own homes, tons of middle class and poor people also bought homes and planned their lives under the assumption that housing prices would go up. Tanking housing prices would destroy their trust in the system that they bet everything on.

This is pretty much the crux of it. High housing prices could be "fixed" almost overnight, but for almost every citizen of the first world, their house is the single biggest investment they will ever make in their life. You'd be destroying everyone's retirement plans and there'd be major economic repercussions.

But there's also the second-order problem which is the people who realize that governments will never let the value of housing decrease because of the above, so you have upper middle class people owning "investment homes", or foreign investors buying homes they never intend to live in (or, in many cities, never even bother renting out), or even corporations like BlackRock buying up houses because they know it's such a safe investment.