I think we need to start thinking more clearly about real estate as a combination of two things: structure (depreciating) and land.

Land behaves very different from other assets, because there is a finite amount of it, and it generates economic rent. And the increase in land value generally comes actions not of the owner, but of others, and of the government deciding what is allowed on the land (which happens at the local level, where a small cabal of landowners can exert great influence over a small number of officials making decisions).

And unlike speculation on, say, lumber futures, speculation on land by buying it and hoarding it is actually a huge economic damper. Real estate speculation, by holding a property underdeveloped until it can be sold for maximum profit, creates a land bubble because it withholds productive use of that finite resource that everybody is trying to get.

The best way to solve this would be to, IMHO, tax away all the economic rents that land generates. This removes the speculation, and ensures that every piece of property that is being underutilized will get transferred to someone who can better use it. This will keep housing prices down, because more houses will be built in high demand areas. It's a tax that would greatly improve economic efficiency, housing affordability, and our overall productivity. (It does need to be paired with zoning reform, though).

We also need to reinvigorate our construction sector's productivity, and reduce the shocks to it from the boom bust cycle, but that takes different policy.

I am referring to the United States. In my youth I traveled a great deal, especially around the Midwest and Boston-Washington DC corridor and nearby countryside, much of which has since been developed.

If you do a search for long term housing price data you will see that until the burst of inflation in the mid 1970s house prices were mostly flat. There was still inflation and wear, but the prices remained about where they were. In this environment where house prices are flat and houses wear out the asset becomes known for its depreciation.

The big thing about locales is their vulnerability. It really is the case that back then some undesirable people moving in to a community could start a cascade of people moving out. In that case prices went from flat to falling fast. If you really did pick a great locale then your reward was prices remaining flat.

What you’re saying isn’t true though.

https://fred.stlouisfed.org/series/MSPUS

Not to mention you can collect or save on rent which also goes up with inflation

The graph you’ve linked doesn’t really include the bit they were talking about (namely all the time before the 70s). Like there’s a bit at the very beginning but hey it’s kinda flat.

In much of the North and Rust Belt of the US, houses declined in real dollars between the heydey of the mid-20th century and now. Detroit is a good example.

Ok but didn't Detroit like... collapse? Not every city is an economic monoculture of an industry that was offshored.

A lot of smaller cities are close enough to monocultures. If Disney pulled out of Orlando, for example, the housing market would implode.

Even if only 10% of the jobs are taken by a single company or industry, losing that is sufficient to stop price growth.

bad example because Detroit became a shithole with no job opportunities. of course housing goes down if the area around it becomes a living hell.