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On the whole you are right and no disagreement from me. The measure of inflation uses shelter though so rising home purchase prices generally means that when th
by wonderwonder 5y ago
On the whole you are right and no disagreement from me. The measure of inflation uses shelter though so rising home purchase prices generally means that when those same house purchased at a higher price are rented out the price they rent for is likely going to be higher, raising costs for non owners. So yes, you are correct but rising home prices while a good thing for the owners that got in before the prices rose is not a good thing for anyone else. With that said I am a home owner that is happy my house has increased in value but at the same time, it generally means nothing to me as if I wanted to move I would have to buy another house that has increased in value as well. Its only positive return for me is if I take out a loan on the house it allows me a lower LTV and subsequently a lower interest rate on that loan.
- lkrubner 5y agoAbsolutely true, and I was in no way suggesting that rising prices for homes was good or bad. I've tried to stay neutral on that issue. The point, which is important to this conversation, is that nominal increases in the price of an asset cannot coherently or conceptually be understood as a form of "inflation." The phrase "asset inflation" is one that we can use jokingly and informally, but formally it would not make any sense in any real attempt to judge changes in the standard of living. By contrast, these are all valid questions: Are wages going up faster than the nominal price of homes? Is labor productivity going up faster than the nominal price of homes? Is the share of national income going to labor increasing or decreasing? Is asset wealth increasingly held in liquid or illiquid forms? Is average rent going up faster than average wages?