I'd like to see that argument. The median home in California is not by any means affordable. The median home in many other states is absolutely affordable. Furthermore---and back to my original argument---suppose that home prices are X * C where X is the median salary and C is some number between 0 and 1. What's stopping someone from drastically undercutting the artificially-high home price?

I have no reason to believe that either home prices or rent are set by wages.

I would say that easy access to loaned capital has perversed the connection between wages and house prices a bit.

>easy access to loaned capital has perversed the connection between wages and house prices a bit

Only to a certain extent. Loaned capital is still limited by wages (no one is going to give a $1 million mortgage to someone who makes $40k per year). But again, I don't think wages has hardly anything to do with house prices; it's all about supply and demand. Sure, most people might only be willing to pay 1/3 their salary on housing. That doesn't mean that the price for housing is that number. If a huge supply of housing for less than that price floods the market, then why would everyone continue to pay 1/3 their salary for housing when they could pay 1/4 or 1/6?

Nope. Loose money (low rates) mean yiu can borrow more for the same cost on the interest portion.