In 2005 I got a job at a bank. One of the first lessons I learned was when talking to customers looking for a home loan, times their income by 3.5 to get an idea of how much they could afford/how much we could lend.
Then the market share battle really fired up and banks moved from that ‘old’ rule of thumb to a ‘servicing index’

Suddenly the multiples started ramping up. People could borrow more..... and...... they did
Then real estate companies start stripping price from listings and moving to auctions or tenders....

Home buying is an emotional exercise for many, so when you fall in love with a house, and the bank offers you more money than they might have previously, you offer/bid more
Then interest rates kept falling (largely in response to a financial crisis bought on by an overinflated housing market in the US). So everyone gets more confident. Banks offer more credit, customers take up the offer
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