This seemed to come out of nowhere:

Real estate will always tend to increase in value because nobody is making any more of it. Ever. This is not true of human beings. Supply and demand.

Oh no. Do we have to back up and discuss whether speculation has inflated the cost of real estate far beyond utilitarian supply-and-demand values?

The median price of a home in America has grown about 800% in the last four decades. If that were due solely to population growth the US would have a population of several billion people right now. C'mon, Tom.

800% is spread across the entire country, and inflation has been an order of magnitude higher in areas like the San Francisco Bay and LA and NY et al. You can point to market forces exacerbating the problem in these areas, but they're still only partly utilitarian. These areas experience disproportionate population growth and thus demand-side pressure precisely because they're affluent areas, full of people with rising incomes looking for investments to absorb their new surpluses. That's the perfect breeding ground for a speculative, inflationary spiral.

I think it's a bit simplistic to assume that the "law of supply-and-demand" expresses a simple linear algebraic relationship. It clearly isn't so. Affluence moves people into nonlinear realms in which the simple arithmetic calculations of necessity are replaced by the satisfaction of desires and gratification of ego. People with a surplus make different decisions than those struggling for subsistence. You can see it most dramatically in realms like real estate, where affluence transformed the relatively simple proposition of the necessity for shelter--a purely utilitarian economic transaction--into the complicated and risky game of speculating on eternal inflation, set in the context of a competition ranked on the basis of paper wealth. That's pure bubble thinking, and that kind of bubble always collapses eventually.

Add to that building codes that restrict density and many other things (I can't add a room to my house), and it gets even tighter.

We both know that zoning restrictions like that are motivated by a desire to keep property values high by creating an artificial shortage of housing. Who keeps coming up with laws like that? Well, the owners of the most expensive housing, of course. Nobody in search of affordable housing would cut their own throats that way. You don't have to be a rocket scientist to figure out that apartments are cheaper than houses.

But the economic forces I'm positing could finally end your pain, or at least most of it, as pressure mounts inexorably for less expensive housing in urban areas. It'll be a two-edged sword, though, because relaxation of price-supporting regulations will allow some decline in overall property values. Adam Smith giveth, and Adam Smith taketh.