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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (91061)1/30/2008 5:10:50 PM
From: GST  Read Replies (1) of 110194
 
Housing prices definitely do not have to go up in an inflationary cycle -- that depends on its attractiveness as an asset class, and right now it is very, very, very low in attractiveness. Other asset classes, like precious metals, can soar to the stratosphere while housing stagnates.

If you see it as assets versus income and expenses it gets a little bit more clear. Housing is an unattractive hedge against inflation right now and is likely to stay that way for a long time. But that does not mean there will not be scorching hot inflation -- it just means you had better find a better hedge. Housing is a traditional hedge, and that is what leads to the assumption that inflation must be tied to housing -- but it is simply wrong to think that way -- there is no necessary connection. Housing is merely a hedge -- and right now it is not an effective one.
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