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: Lizzie Tudor who wrote (11041)	6/4/2003 8:53:36 PM
From: Mr. Sunshine	Read Replies (4) of 306849

<<Houses are tied to inflation we all know that.>> We do? Actually, home prices are a function of supply and demand, each of which have countless variables. One of the factors on the demand side is income, which usually rises with inflation, so you are partially correct, but only partially. By your reasoning house prices should be fairly stable now since inflation is almost zero. Not the case recently. In fact, low inflation has led to low interest rates, which has led to higher affordability of housing which has led to increased demand for housing which has led to higher housing prices. When inflation picks up, interest rates will rise, houses will be less affordable, and prices will likely decrease. Exactly the opposite of your thesis.

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