As a data point, condos in Toronto (condos in Toronto are generally tiny and not the most desirable place to raise 2 kids) appreciated by 9-10% this year despite continuous bubble talk by various levels of govt. You and I both know this will not stop until rates rise; and they won't - at least in canada - because of a significant problems in the oil sector of our economy. Is the right thing to do to buy into this "ponzi" scheme and try to time the exit? Or continue to hold the course of staying out of it and waiting for rates to rise. I have rented since 2008 when I graduated and I'm tired of shoveling my money into the fire :'(
Mortgage rates do not cause it as much, a percentage point increase in a typical bay area mortgage will only add ~$300/mo to a 560k house mortgage. The mortgage interest deduction reduces it by your tax rate.
SF is an area where people rather have an economic recession vs growth because the system can't handle growth.
A better national economy also probably has fewer people chasing the wealth in the valley.
Crack the whip! The best way to motivate those slaves is by making their cost of living higher! That'll force then to get better jobs!
You know, the stagnant wages that we have seen for the last 30 years of low inflation.
In any case, I do believe the current interest rate environment has distributional consequences that haven't been well-studied. It seems the biggest beneficiaries of this environment will be people with lots of debt-financed assets who manage to sell for high nominal prices. On the other hand, a lot of people think rates aren't coming down any time soon (check the yield curve on US treasuries, the 30-year rate is like 3.4%) so maybe this will be a one-time shock where people who took on a ton of debt ca. 2008 will reap big one-time profits as cheaply-acquired assets realize big capital gains.
In any case, I think it's naive to assume holding rates so low, for so long, doesn't have major wealth transfer effects.