SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Residential Real Estate Crash Index
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: mishedlo who wrote (34519)6/28/2005 8:52:51 AM
From: Wyätt GwyönRead Replies (2) of 306849
 
For starters many people own their home for years and are not affected mortgage wise over time.

this is the wrong way to look at it, imo. i think what you fail to grasp is that asset inflation is still inflation. Jim Grant pointed that out for years vis-a-vis the stock market in the 1990s (and lately w/r/t the RE bubble). in other words, inflation can be expressed not just directly in consumer goods but in assets. let me explain how i look at it from an MPT perspective. understand here that what i have is a basket of asset classes which in total are a "net worth", of which personal RE is a fixed percentage. you could say that i have an RE "budget" which is defined as a percentage of my net worth.

if i lived in CA and was given a RE windfall, i would have a "problem", in that the inflated RE asset would be too large relative to my net worth. if my goal is to keep RE at 10% of net worth, i would have to constantly be trading down to a smaller sized house (funneling the realized gains to other asset classes so as to "rebalance").

exchanging one item (house #1) for a less valuable item (house #2) for the same price (10% of a basket of asset classes comprising the portfolio--house #1 was 10% at some point in the past, but due to inflation the less valuable house #2 is now equal to 10%) is exactly inflation. it is exactly like the person who has budgeted $6 for a movie now cannot watch the evening shows and must catch the matinee, or the lady who must eat cat food instead of steak. IOW, it is a "substitution trade" which is a direct expression of inflation.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News