It's all about supply and demand. Reminds me of a ponzi scheme somewhat as long as you have new fools coming in willing to pay it works, but when you don't it all goes to heck. But hey it's a free country and if people want to blow money, go right ahead.
My mother in law is going through this right now. She's 68, recently inherited some money and is blowing it on adding on to her folks old farm house. Never mind the grand kids are almost grown and probably won't be coming back to visit near as often. It doesn't appear to make any financial sense and we've shared that with her, but hey she's going to do what she wants!
The whole where you live debate is somewhat amusing to me. California people are going to say California of course and most other people will vote for where they are at.
We have some friends who are thinking of moving back to Iowa from California. Their home is worth a lot more relatively speaking so if they get it sold, will be able to buy a lot more home here and probably have some spare change. Here's the thing; most of their net worth is wrapped up in that home. They don't have a lot outside of that.
Our situation is different and our net worth is structured much differently. Buying a relatively inexpensive home in the midwest allowed me to pay it off quickly, invest in other things and have a much broader range of investments than these friends. The incremental costs to invest in the stock market also seem much more reasonable to me relative to real estate...
We travel to places like California, Hawaii, Florida, Arizona when we want and always enjoy visiting, but never enough to want to live there(other than perhaps staying a month or two in the winter when we get older.)
Last thought. Nothing wrong with renting. My brother is an engineer and has done that his entire life and is wealthy. I chose to own, but that's because it's relatively reasonable to do so here.