A rise in house prices did nothing for me, nor many others. A decline is a similar non-event, neither helping nor hindering my ability to purchase rice.
For the 5-10% buying a new house this year, it still will do little as most will be selling a house, too, for less money than it was worth before, except they'll lose the usual 10% to the vultures (commissions, taxes, improvements, fees).
The major effect of the decline in house prices (and the return of rational lending standards) has been to shut down the house-as-ATM. This is the reverse of what Mish is thinking (it seems to me) in that they will have a harder time, not easier, of affording the necessities.
If we ruled the world economy, this process would be highly deflationary. Instead it will turn out to be a deflationary head wind in the face of a huge inflationary tsunami and so there will be a slight moderation in the rapid ramping of inflation for the stuff we want but don't absolutely need (tvs, cameras, autos, air travel). Those items for the most part will inflate in retail price, but not so fast as necessities.
I could see a deflationary bust out there being possible in several years, but who gives a crap about a 25% drop in retail prices after a 150-200% run-up? |
