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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (69779)9/14/2006 1:05:38 PM
From: GraceZ  Read Replies (4) of 110194
 
I think the steep trend in rising home prices is history for quite some time.

As gpowel has suggested numerous times, home prices could have been making a one time adjustment to worldwide lower inflation expectations. I know that sounds counter intuitive, but consider that a house can be looked at as an investment that yields a return. In this case, the return is housing services. The value of those future housing services has a net present value and in a low to falling inflation rate environment the net present value rises the same way the value of a bond that pays a fixed income over it's life rises when inflation expectations fall because the future payments don't have to be as severely discounted to account for inflation.
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