Your points are well-taken. I agree that home prices are still significantly overvalued (probably by 35% or so in San Diego). I’m just saying that if one believes that dollar devaluation and inflation are on the uptake, then a significant chunk of the housing price correction going forward could be eaten by inflation. It will be a factor.
A lot can happen in 10 years to the value of a dollar due to inflation.
Lets take a stroll through a brief history of home prices in this country during inflationary times:
1970 : Price of a new home = 26,600 *
Median household income = 8734
inflaiton at 6.5%
1975 : Price of a new home = 42,600
Median household income = 11,800
inflation = 14.1%
1980 : Price of a new home = 76,400
median household income = 17,710
inflaiton = 13.5 %
SO, there you have it. During a period that included significant chunks of double-digit annual inflation home prices tripled and income more than doubled.
1990 : Price of a new home = 149,800
Median Household Income = 29,943
inflation = 5.4%
1999: Price of a new home = 195,800
Median household income = 39,973
inflation = 2.1%
Higher inflation does not equal downward pressure on home prices.
