>>>>Local market?
Median income 63K
Median House? 525K
That is unaffordable for most folks.<<<<
You have to be careful about telling the truth here. So many Boomers are going to tell you back in my day you just had to work hard blah blah blah. Yeah back in your day, the average rent was about 3 to 4 days wages. Local to me in a very poor choice of suburb (chicago metro) from my point of view to live in, starter homes are renting for $2,000 or higher.
Something is really broken in regards to real estate costs. Like you said, the prices have been rising way faster than wages over time. Perhaps the costs are rising because many are viewing single family homes as an investment vehicle. But that sort of analysis is over my head to be honest.
When I bought my first house, back in the day, I packed lunch every day, made all my own dinners, gave up going out, even for beers, sacrificed on just about all purchases, barely made the mortgage payment. Oh, and fixed my own late model cars. That was when I was in my late 20's. Kids today would blow their ability to make the payment in a week of door dash lunches and their must have new cars.
Forgot to add, my first mortgage was 12.5% interest.
Your analysis is valid.
One totally new factor is institutional investment in single family housing.
This is very important because housing prices are determined by actual transactions—and last I saw only about 5% of single family houses have a transaction in a given year.
Active institutional investors can (and have) caused housing prices to skyrocket in “hot” markets.
If they panic and try to sell in large quantities they can (and imho will) cause a major crash as well.