The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Amy J who wrote (8796)	2/10/2003 9:47:46 AM
From: Elroy Jetson	Read Replies (2) of 306849

Real estate prices follow measures of income very closely, when adjusted for interest rates (effective income). There is no linkage between inflation and real estate prices. There is a linkage between inflation and mortgage rates, the value of money and the cost of renting money. Since income is measured in money, the linkage between money and inflation affects how income is measured and thus real estate. Since 1930 US income has increased about 3.0% per year more than inflation. Real estate prices have exactly matched this increase in income. If real estate prices were linked to inflation since 1930, real estate prices would be 87% lower than they are currently. The primary connection between real estate and inflation is sloppy thinking. This is a chart showing real income growth, ie after removing inflation. econ.rochester.edu

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