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: Wyätt Gwyön who wrote (26984)	2/8/2005 2:37:26 PM
From: GraceZ	Read Replies (1) of 306849

Housing cost can't help but move with the inflation in incomes on a macro scale. But housing prices are another story. What everyone forgets is that houses are a store of accumulated savings as well as a current cost, savings that is frequently passed down through generations. In other words, price isn't simply a function of the ability to make payments on a mortgage, a large part of what is used to buy houses is savings, either the buyer's savings or their family fortune. Land also has a scarcity factor where people want to live. Anything that is getting more scarce will rise in price on a real basis ahead of inflation. While there is plenty of land in the US, where people want to live, on either coast, is limited by geography and serious growth restrictions. There can only be so much beach front, so much Manhattan, so much buildable land squeezed in on the California coast. Add in open space plans, height and density restrictions and other anti-growth initiatives, you then have a prescription for prices rising consistently above inflation and incomes in high demand areas. At least until you run out of people willing to lock up accumulated savings in a house.

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