6 ms·

Real estate has clearly been shown to not be resistant to inflation over the past year.

by aarongray 6y ago

tome 6y ago
Could you elaborate?
- aarongray 6y ago
  Home prices in my area are up around 15% over the past year.
  - tome 6y ago
    I'm confused. That suggests that real estate is very much resistant to inflation.
    - aarongray 6y ago
      Haha I was wrong, I see what you were saying now. I thought you were saying that resistance == unaffected. But you were saying that the price of real estate rises when inflation occurs, so buy it before inflation happens. My bad. :)
  - Kranar 6y ago
    That makes real estate investments a good defense against inflation. A good defense against inflation are assets whose price increases at a rate higher than the rate of inflation. A bad defense would be an asset whose price increases at a rate lower than that of inflation.
    - lvs 6y ago
      I'm not sure anyone in this thread knows what inflation is. If the cost of housing rises, that is inflationary against all other fungible assets that could be used to purchase housing. That is, one requires a larger quantity of all assets -- dollars, crypto, stocks, bodily fluids, etc. -- to acquire a roof over one's head. Only if the cost to purchase housing is somehow lower by holding value in a particular asset could you get ahead of the inflationary pressure caused by rising housing prices. Too many cryptonuts think inflation just means "money supply." That is play time economics.
      - Kranar 6y ago
        Inflation as it's being used in this conversation and in general is measured against a specific currency. I mean you could, I suppose, use the term to measure the cost of a specific asset against a basket of other assets, but that is not really standard and if you wish to use it that way you should qualify your usage as such to avoid confusion. Using your approach you'd end up saying something like Apple is experiencing inflation because its price has gone up more against housing, oil, General Electric stock. Yeah, that could be done, but it's not the way the word is being used in this conversation. We're talking about inflation of US dollars against a basket of goods as measured by the CPI as opposed to talking about an increase in housing costs relative to Apple stock.
        lvs 6y ago
        The only thing you said that is true is in the last sentence. The basket of goods affecting inflation is heavily influenced by the cost of housing. All you care about when holding a store of value is how much of that denominated fungible asset can be exchanged for things you need to live.
        Kranar 6y ago
        Ah, so according to you my first sentence is false then? Let's see what a simple Google search yields: >Inflation is the decrease in the purchasing power of a currency. >Inflation is the decline of purchasing power of a given currency over time. >Inflation is a persistent rise in the average level of prices over time in a given currency. > Inflation occurs when prices rise, decreasing the purchasing power of your dollars. Those are literally the top search results for "inflation" when I Google the term. Now certainly your Google search for that term may differ from mine and you are certainly welcome to share your findings. Until then I will rest satisfied that my first sentence expressing that inflation is almost always understood to be with respect to a currency is also true.
        lvs 6y ago
        I think you're definitely learning more just reading Google. Enjoy!
    - Hydraulix989 6y ago
      Do you really believe real estate should be an investment, rather than a place to live?
      - frockington1 6y ago
        Why not be both?
      - Kranar 6y ago
        I absolutely do think it should be an investment and I think treating housing like an investment has substantially increased the quality of housing. A great deal of advances in materials, construction, electrical work, plumbing, you name it... is because housing is treated like an investment and people are willing to spend money to keep their asset in top shape. Furthermore I believe that investing in real estate promotes those asset owners to contribute to the neighborhoods they've invested in. When you invest in something you are participating in its growth and you're attempting to align your well being with the well being of the asset you're invested in. That's a great thing. The downside to real estate investment is that it could prevent future people from participation. The solution to that isn't to stop treating real estate as an investment, it's to allow more opportunities for building and to incentivize people to build entirely new communities instead of pigeon holing everyone into a handful of existing mega cities.
        guenthert 6y ago
        > I absolutely do think it should be an investment I think this is treated differently in different cultures. In Germany, while there is a real-estate as investment market, many people don't (expect to) move much during their lifetime. They buy their home ('Eigenheim') essentially for life (sans the tail end in a nursing home). Still many put a lot of time and money into those houses they don't expect to sell. It's a quality-of-life thing (and some bragging rights). You can (and some do) spend easily a fortune on a kitchen alone. You even find more than one kind of light switch there. So I'm not quite convinced that real-estate as investment is necessary to drive housing quality.
        6y ago
White_Wolf 6y ago
actually 15% sounds about right and normally would be higher this time because of all the printed money. I would of expected something like 35-45%. Resistant to inflation means that the price increases roughly with the same % as inflation.

Real estate has clearly been shown to not be resistant to inflation over the past year.

tome 6y ago

Could you elaborate?

aarongray 6y ago
Home prices in my area are up around 15% over the past year.
- tome 6y ago
  I'm confused. That suggests that real estate is very much resistant to inflation.
  - aarongray 6y ago
    Haha I was wrong, I see what you were saying now. I thought you were saying that resistance == unaffected. But you were saying that the price of real estate rises when inflation occurs, so buy it before inflation happens. My bad. :)
- Kranar 6y ago
  That makes real estate investments a good defense against inflation. A good defense against inflation are assets whose price increases at a rate higher than the rate of inflation. A bad defense would be an asset whose price increases at a rate lower than that of inflation.
  - lvs 6y ago
    I'm not sure anyone in this thread knows what inflation is. If the cost of housing rises, that is inflationary against all other fungible assets that could be used to purchase housing. That is, one requires a larger quantity of all assets -- dollars, crypto, stocks, bodily fluids, etc. -- to acquire a roof over one's head. Only if the cost to purchase housing is somehow lower by holding value in a particular asset could you get ahead of the inflationary pressure caused by rising housing prices. Too many cryptonuts think inflation just means "money supply." That is play time economics.
    - Kranar 6y ago
      Inflation as it's being used in this conversation and in general is measured against a specific currency. I mean you could, I suppose, use the term to measure the cost of a specific asset against a basket of other assets, but that is not really standard and if you wish to use it that way you should qualify your usage as such to avoid confusion. Using your approach you'd end up saying something like Apple is experiencing inflation because its price has gone up more against housing, oil, General Electric stock. Yeah, that could be done, but it's not the way the word is being used in this conversation. We're talking about inflation of US dollars against a basket of goods as measured by the CPI as opposed to talking about an increase in housing costs relative to Apple stock.
      - lvs 6y ago
        The only thing you said that is true is in the last sentence. The basket of goods affecting inflation is heavily influenced by the cost of housing. All you care about when holding a store of value is how much of that denominated fungible asset can be exchanged for things you need to live.
        Kranar 6y ago
        Ah, so according to you my first sentence is false then? Let's see what a simple Google search yields: >Inflation is the decrease in the purchasing power of a currency. >Inflation is the decline of purchasing power of a given currency over time. >Inflation is a persistent rise in the average level of prices over time in a given currency. > Inflation occurs when prices rise, decreasing the purchasing power of your dollars. Those are literally the top search results for "inflation" when I Google the term. Now certainly your Google search for that term may differ from mine and you are certainly welcome to share your findings. Until then I will rest satisfied that my first sentence expressing that inflation is almost always understood to be with respect to a currency is also true.
        lvs 6y ago
        I think you're definitely learning more just reading Google. Enjoy!
  - Hydraulix989 6y ago
    Do you really believe real estate should be an investment, rather than a place to live?
    - frockington1 6y ago
      Why not be both?
    - Kranar 6y ago
      I absolutely do think it should be an investment and I think treating housing like an investment has substantially increased the quality of housing. A great deal of advances in materials, construction, electrical work, plumbing, you name it... is because housing is treated like an investment and people are willing to spend money to keep their asset in top shape. Furthermore I believe that investing in real estate promotes those asset owners to contribute to the neighborhoods they've invested in. When you invest in something you are participating in its growth and you're attempting to align your well being with the well being of the asset you're invested in. That's a great thing. The downside to real estate investment is that it could prevent future people from participation. The solution to that isn't to stop treating real estate as an investment, it's to allow more opportunities for building and to incentivize people to build entirely new communities instead of pigeon holing everyone into a handful of existing mega cities.
      - guenthert 6y ago
        > I absolutely do think it should be an investment I think this is treated differently in different cultures. In Germany, while there is a real-estate as investment market, many people don't (expect to) move much during their lifetime. They buy their home ('Eigenheim') essentially for life (sans the tail end in a nursing home). Still many put a lot of time and money into those houses they don't expect to sell. It's a quality-of-life thing (and some bragging rights). You can (and some do) spend easily a fortune on a kitchen alone. You even find more than one kind of light switch there. So I'm not quite convinced that real-estate as investment is necessary to drive housing quality.
        6y ago

White_Wolf 6y ago

actually 15% sounds about right and normally would be higher this time because of all the printed money. I would of expected something like 35-45%. Resistant to inflation means that the price increases roughly with the same % as inflation.