In the US blogosphere, Matt Yglesias puts the problem with common framing of discussion of "house" prices well:
If I were to pick something to quibble with in Ryan Avent’s The Gated City it’s a perpetuation of the American habit of mixing up discussions of the price of houses with discussion of the price of land. … There are lots of perfectly ordinary reasons for land to go up or down in price. A house, by contrast, is a large decaying physical object.Ryan Avent agrees:
In my experience, people living in rural areas are generally clear on the difference here both because land is put to more varied uses and perhaps because more people live in trailers—homes sold separately from land. But it’s just as true in a urban or suburban setting.
When broader shifts increase the economic potential of a place like Silicon Valley, land with easy access to that place also rises in value. The natural market response is to maximize the return on valuable landholdings by using them to provide shelter to the many people who’d love to have access to the local job market.(Both via).
Unfortunately, the response in many productive cities is to try to circumvent this response. Residents use lots of different tools to prevent landholders from providing the access to the local economy that the market demands. As a result, we fail to take full advantage of the productive city’s economic potential, jobs in productive industries that would otherwise be created are not, and the economy as a whole is worse off.
When you see rapidly rising home prices in a rich city, that’s the process you should be imagining to yourself; it’s lost economic growth and lost jobs made manifest.
Which is not quite how I would put it, given that restricting land use can greatly increase the value of land permitted to be used for housing (though not necessarily in a very stable way). Avent also fails to note the property-tax/political donation incentives acting on officials.
Still, it is very useful to have an uber-blogger such as Matt Yglesias make the misleading framing point--that the issue is land supply and prices, not "house" prices--so clearly.