Those returns can't continue. When people spend 30% of their income on housing and housing doubles in cost, it means they'll now have to spend 60% on housing. From there it simply can't double again, not without coping strategies exceeding anything reasonable (1 family per room, families living in garages, commutes that exceed 6 hours a day).

Every coping strategy has it's limit. You can't commute more hours than there are in the day. YOu can't have more than 3 people living per room (at least not legally). Once you move in with your parents, you can't do it again. etc. I think we've reached that limit in the bayarea (at least the core bay area) so we can look forward to housing returns of roughly inflation.

Even with the severe dystopian restriction on supply, it will just force more and more people out of the bay area.

Maybe some of the outskirt areas still have room to go up, like Tracy, antioch, brentwood, etc. some of those places haven't yet been gentrified.

This is also a fallacy.

Why do you think houses are going for 2 m$ in the bay area? Because the expectation that it goes up is already priced in. Also a good reminder that the return of the past are not an indication of future returns.

Buying in the bay area is de facto a speculative investment as rents are comparatively way cheaper. The only incentive for buying at those prices is the hope to sell it for even more to someone else later (see also, the greatest fool theory).

Depends on what time period you look at.[1]

Housing in SF was pretty much flat from 1990-1998. It went down by ~30% in 2008 and took 10 years to match the peak in 2006.

[1]https://fred.stlouisfed.org/series/SFXRSA