Thanks for all the feedback!
I'm in Cambridge, MA and while our housing market [for purchasing] has been very strong for a while, it has decidedly not outpaced the even-stronger stock market.
There aren't a lot of places with stronger real estate markets than Cambridge, so if this is true for you it's pretty likely that it's true for just about everyone, including me. Certainly, I haven't compiled data to support my earlier claim, so I retract it. :) For high earners who can save a high fraction of their income (and at the moment, that's me), this probably changes the math. If housing is eating up a lot of your income (most normal people, but maybe not most people reading this thread) it might be an academic distinction.
I wish I had bookmarked the article when I first read it because I can't find it when I go back and look. In short, I stumbled upon an analysis someone did over the past 100+ years of housing in San Francisco proper and found that the average appreciate in housing cost was a fairly steady rate that was several percentage points above inflation. So we can certainly argue that it is an unsustainable growth rate, translating into a bubble that needs to burst, but that bubble has been growing for 100 years so far without busting. I'm not willing to bet my own money on that kind of a time frame.
This is precisely how I view the problem.
Real Estate is very sensitive to local market conditions. That being said, this is probably the first time I've heard anyone say that there may be a "permanent" housing shortage since before the crash of 08. In fact it makes me want to short REIT's....LOL.
LOL indeed! I do get what you're saying. I certainly understand that real estate can't out-pace inflation
everywhere in the US, forever, but it seems to me that it can far outpace inflation (and has!) for a very long time in places where you have a reasonable commute to a large number of decent jobs. Of course, a lot is wrapped up in the definitions of "reasonable commute" and "large number of decent jobs", as $200k rightly points out.
For myself, I'm going to rent until Option #3 becomes available. Or, execute Option #4, my dream, which is to somehow find a not-completely-hillside-spot north of Dominic Toretto's house and build a geodesic dome. :) Which we'd use as a basecamp to power to FI. Or Option #5 – Van Living at Friend’s. But yeah, buying an actual house will be something I do elsewhere.
I like your fourth and fifth options (not that I'd want Dom as a neighbor)! For me this is most of the appeal of this community: thinking creatively about what we actually
want and how to get it without all the other consumerist trappings gives us a lot of more freedom compared to regular suckers with their McMansions and jet skis.
In our specific situation: we should be able semi-FIRE to a lower-COL area in 1–5 years depending on our margin of error. (Because of the many problems surrounding healthcare in this county, we assume we're going to need a job with benefits essentially forever, but we'll at least be in the position that it doesn't matter
which job as long as they'll take care of us if we get sick. This is not the forum to expound on that, but it does mean that the amount of money we need to down-shift is a lot smaller than the amount of money you'd need to do a "classic" FIRE.) We like it here and would ideally stay 5+ years, but not forever: at some point, we're going to need to be close to family and moving to where they are is going to be a lot easier than moving them here.
So we're probably going to do exactly what everyone is suggesting to people who aren't dead-set on staying forever: rent as cheaply as we can stand, be mindful of our privilege, and stay flexible. In the probably-unlikely event the real estate bubble bursts but our income stays the same, we'll be pretty reasonably-positioned to buy here and maybe we'll stay a while after all; if not, that's okay too.