You countered your own argument. If your house stays at $100k but there is 5% deflation. You made 5%. If your house is worth $100k but falls to $95k because of

You countered your own argument. If your house stays at $100k but there is 5% deflation. You made 5%. If your house is worth $100k but falls to $95k because of deflation, your networth has dropped, and your buying power has stayed the same. In the first scenario you can do a happy dance, in the second scenario, if the house is 100% paid off you aren't out anything. If you have paid off 75% of the house you are behind, because the unpaid off portion of the home dropped in value, but the debt stayed the same. This is why they try to keep inflation at 2-3% it means that debt decreased at that rate because your buying power for that financed amount has decreased effectively lowering the amount of debt. Imagine you buy a house and pay only the interest. If inflation is at 7% and the interest is 3% you are ahead each year. I your interested is 3% and there is 3% deflation you are behind each year.