While it doesn't directly affect the average person's purchasing power, the same dramatic increase is happening in other asset values as well. [0] One interesting thing to note is that 2019 EV / EBITDA values were already "high," before the coronavirus was spreading.
I suspect these two phenomena have different causes overall, but low interest rates are a common factor that cause all asset prices to increase.
On the housing side, I suspect consumers purchase the house that their cashflow can comfortably support, not necessarily the one where they believe it is correctly valued, because the assumption that house values only increase means purchasing a well constructed house is almost never a "bad deal."
I'm not sure what the "solution," is, but knowing that voters hate when their home values fall does not give me confidence that prices will decrease in the long term.
I suspect these two phenomena have different causes overall, but low interest rates are a common factor that cause all asset prices to increase.
On the housing side, I suspect consumers purchase the house that their cashflow can comfortably support, not necessarily the one where they believe it is correctly valued, because the assumption that house values only increase means purchasing a well constructed house is almost never a "bad deal."
I'm not sure what the "solution," is, but knowing that voters hate when their home values fall does not give me confidence that prices will decrease in the long term.
[0] https://www.statista.com/statistics/953641/sandp-500-ev-to-e...