Real Estate Bubble?

Baker’s thesis — backed up by 50 years of data — is that housing prices over the long run increase only at the rate of inflation, represented by the consumer price index (CPI). This persists despite occasional fluctuations in supply and demand, regardless of rising incomes or changing mortgage rates. But currently, average housing prices have outstripped inflation by 30%, and Baker asserts only one-third of that is due to the increased price of renting. He examines the increased demand and higher prices, and dismisses popular theories that an increasing population, lower mortgage rates, and new loan programs are to blame.

— Motley Fool: Is Real Estate Safe?

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