It's a lack of supply caused by costly and overzealous environmental assessments which strangle the process of land development in Canada, particularly Ontario.
If you want a convenient scapegoat, blame the McGuinty government of the early 2000s. When the 2005 Greenbelt Act was passed, developers across the country warned of a housing crisis in the future due to the effect the bill would have on the price and timelines for new construction. 17 years later we'd prefer to blame China or NIMBYs, but the reality is Canadians, and especially Ontarians, did this to themselves when they allowed politicians and environmentalists to ignore the concerns of land developers and engineers.
Plenty of basic human needs are financialized - crops and water and electricity - and they don't have any problems.
Why is financializing land and real estate a cause for the problem?
I argue it's not financializing, but the lack of allowance for production of more, when the price signals a demand for more.
When crop prices are high, farmers grow more, or make use of more land to grow. Ditto with electricity or water. Why isn't more land opened up for development, when price of real estate is high?
The "theory" relates to increase over time for a single location, not differences between 2 locations at a single point in time. But to stick to your example, investors are more likely to flock to a location with greater returns. At the same time, Lubbock hasn't exactly remained stagnant.
> Which should’ve helped a whole bunch of hard-working regular people to buy their first-time homes, but that is not what is happening it seems?
This is false if you think about it.
What drives the price of a house is what people can pay on their monthly payments.
As rates go down prices go up as people can afford to pay more.
Unfortunately for home buyers this means the downpayment goes up. What you end up with is a bunch of first time home buyers who can in theory afford the mortgage payments but can't build up the $200,000 nest egg required as a 20% downpayment on a $1,000,000 home.
When rates go back up home prices will drop and so will the size of the downpayment required, even though the person will pay about the same monthly on their mortgage.
Lower rate help those with existing homes and therefor existing equity more than those without homes.
It would have been true if the supply side of the market was working. Low interest rates have increased demand but the market has not been apply to increase the number of available homes to meet the demand, hence existing properties have increased in price.
