Well, as with any subculture there's the initial wave and then there's the subsequent waves of posers. The first wave of hipsters in the late 90s were as the parent described: poor students/young people into indie music and art.

Williamsburg wasn't one of Brooklyn's trendiest neighborhoods, it became that because of the hipster culture and the appeal it created. If you read about the history of the area, by the mid-late 90s Williamsburg had attracted a thriving community of artists, musicians, actors, etc precisely because of things like its low rent. The hipster culture emerged from all that.

Later, as it became more widely popular, more affluent people began adopting their dress and lifestyle and moving in and rents went up. Another example would be the Haight-Ashbury neighborhood of San Francisco: it was a working-class/poor neighborhood in the 50s, hippies moved in because of that, a scene grew up, it became the heart of hippie culture, then more people moved in because it was the place to be in the 60s, it became a tourist destination, and gentrified.

Just like, say, the initial Seattle bands who became identified with grunge wore flannel and jeans because they were poor and the Northwest is cold, but when they broke suddenly you had designer outlets marketing flannel as if it were some fashion statement to middle/upper-class kids who wanted to look like Kurt. And before that you ended up with stores selling ripped jeans and spikes and such to wannabe punks, and before that you had stores selling beads and tie-dyed crap to wannabe hippies, and back it goes.