3 ms·

Inflation (especially asset inflation) is as much expectations about future price rises as it is anything else. If investors expect to a vast expansion of housi

Inflation (especially asset inflation) is as much expectations about future price rises as it is anything else. If investors expect to a vast expansion of housing stock in 3 years, they'll start exiting the market today, to get ahead of it.

coding123 5y ago
We should start taxing vacation, abnb, secondary empty homes at 100x the property tax rate. That would provide housing VERY quickly. Rental housing can be taxed at 10x UNLESS it is offered 10% below market rate.
hogFeast 5y ago
The evidence for the expectations model has changed significantly over the past two years or so. Obviously, central banks are going to move slower given that expectations has been the consensus for two decades. But I think academics are realising (about seven years after markets realised) that central banks have a huge role in signalling and the consumers form their expectations about inflation based on the past (note: the last point is compatible with evidence for expectations when inflation is falling...in other words, if inflation was falling over your sample you would be unable to distinguish between an expectations-based theory and a moving average-based theory of inflation). Also, investors won't start exiting the market if they expect expansion in housing stock. Financial markets trend, they absorb information imperfectly, they overreact, and there is massive volatility as all this occurs. Indeed, there are some investors who base their investment strategy on the inability of markets to react to capital cycles (Marathon Asset Management have written books about this). Investors have different time scales, if the housing stock was going to expand then you would see capital pile into the sectors because people will chase that growth expecting to flip at a higher price at the top.

3 ms·

Inflation (especially asset inflation) is as much expectations about future price rises as it is anything else. If investors expect to a vast expansion of housi

by scoopertrooper 5y ago

coding123 5y ago
We should start taxing vacation, abnb, secondary empty homes at 100x the property tax rate. That would provide housing VERY quickly. Rental housing can be taxed at 10x UNLESS it is offered 10% below market rate.
hogFeast 5y ago
The evidence for the expectations model has changed significantly over the past two years or so. Obviously, central banks are going to move slower given that expectations has been the consensus for two decades. But I think academics are realising (about seven years after markets realised) that central banks have a huge role in signalling and the consumers form their expectations about inflation based on the past (note: the last point is compatible with evidence for expectations when inflation is falling...in other words, if inflation was falling over your sample you would be unable to distinguish between an expectations-based theory and a moving average-based theory of inflation). Also, investors won't start exiting the market if they expect expansion in housing stock. Financial markets trend, they absorb information imperfectly, they overreact, and there is massive volatility as all this occurs. Indeed, there are some investors who base their investment strategy on the inability of markets to react to capital cycles (Marathon Asset Management have written books about this). Investors have different time scales, if the housing stock was going to expand then you would see capital pile into the sectors because people will chase that growth expecting to flip at a higher price at the top.