First, there is the issue that the Price/Rent ratio estimated by the S&P/Case-Shiller National Home Price Index and CPI rent inflation has tended to rise above the Price/Rent ratio estimated with aggregate numbers from the BEA and the Federal Reserve of owner-occupied real estate values and owner-occupier imputed rents. I have attributed this drift to supply constrictions. Price/Rent levels are higher in the constricted cities, so new building must happen where supplies aren't constricted. Where supplies aren't constricted, prices are lower, so the changing composition of housing must cause indexes tracking individual properties to have an upward bias compared to indexes that track all properties.
This is a core confusion about what is happening in the housing market and the economy in general. From an unbiased observers perspective, a market with rising prices due to rising demand looks just like a market with rising prices due to constricted supply. In both cases, the market will be increasingly dominated by buyers willing to pay the higher price. We are predisposed to attributing cause to high income buyers. But, in fact, this data indicates that we have constricted supply, and that, on the margin, households are escaping rising home prices by building homes in less expensive locations.
The same pattern shows up in the difference between S&P/Case-Shiller home prices and the average price of both existing and new homes during the boom period. Average new home prices and the S&P/Case-Shiller index moved together for decades. If anything, the average price of new homes grew at a slightly higher rate at times. But, starting in the late 1990s, the new pattern emerged, and new home prices started rising at a slower rate than existing homes.
This is one of many deceiving issues on this topic. One could interpret this to mean that banks were pushing subprime loans on low income households, and that would explain the lower value of new homes. But, despite this widespread belief, there was no shift to lower incomes among home owners during that period.
The divergence between the prices of new and existing homes after the bust is because we have reduced access to mortgage credit for middle income households, so that more new homes are being built by higher income households, and this is creating a countereffect against the flight from high priced cities.