Housing bubbles are universally destructive

Sure, they want a house so they can live in it. But who wants to pay a million dollars, which you either have to pay interest on (if borrowed) or can't collect interest on (if not), when it's only going to be worth the same amount of money in 30 years? At 5% interest, the lack of equivalent appreciation more than quadruples the opportunity cost of buying the house over the course of 30 years. It changes what they're willing to pay.

> Also I disagree that they are universally destructive - how else do you explain the long term success of high price cities such as London, New York City, Hong Kong, etc.

It has always been the case that some cities are more expensive than others, but that's not what we're talking about. Nor are we talking about small affluent sections like Manhattan. If you look at, say, Brooklyn, it was historically affordable to ordinary people (and 20 minutes from Manhattan). That's what's changed.

And there's no way housing in San Francisco isn't a massive bubble. It's hard to predict how long it will be before the crash, but it's obvious that it's not sustainable.

Housing prices aren't just going up in San Francisco. It's the entire Bay Area. In the last collapse, houses in "good" locations didn't lose any value. There was a pause for a couple of years (or in cities like Palo Alto, none at all) and then they started going back up again. Other cities, e.g. Alameda (http://rereport.com/alc/charts/a_all_sfr.png), suffered losses of over 50%.

I expect to see something similar if there is a collapse of the overall bubble, but there will still be extremely expensive housing. We've been through it all before. https://www.nytimes.com/1990/08/29/business/california-sees-...

edit: also I said they're not "universally" destructive, which I stand by, so long as some affordable housing options remain.

And ofc, since speculation and correction is always a market, the final piece of the dish is that the speculation (and thus, the eventual correction) is significantly large.

And then given that the market itself lasts long (substantially longer than decades), and that we rightfully fear, not the existence of, but the crash, then it seems fine to claim a bubble lasting decades, and even centuries.

And like all predictions of the future, there’s money to be made in the difference between its actual popping and its predicted pop, if you choose to make the bet. Ofc, money to be lost too. And if you expect it to last a century... then just make sure your grandchildren get out before it bursts (and hope it doesn’t take everything else with it). Doesn’t matter to you particularly at that time scale, but it still exists (unless ofc it corrects slowly... but hey, hindsight is 20/20)

It is absolutely true that housing bubbles can span decades. But the longer they grow, the bigger the pop. Unless you deflate them first by increasing supply.

> In the last collapse, houses in "good" locations didn't lose any value.

The last collapse wasn't caused by the same things. What happened then is that banks loaned money to people who couldn't pay it back, which inflated housing prices until they started to default. The people who live in Palo Alto had better credit, didn't default, and could still get a loan even after the crisis (or didn't need one), so the houses in that area didn't lose value.

What's happening in this case is that housing in some areas is getting so expensive that even people making six figures can barely afford it. When it gets to the point that they actually can't afford it, the high end status of the neighborhood won't save them.

And a crash doesn't have to result in cheap housing. It can be a move from preposterously expensive housing to "only" very expensive housing. But if that's a 50% reduction in value, people are going to be unhappy.

> also I said they're not "universally" destructive, which I stand by, so long as some affordable housing options remain.

You may be right that if you consider only the most expensive houses, they may not lose as much value, because they're the ones that are actually worth ten million dollars. But non-universality is a small consolation if the effect still hits 85% of the local housing stock.