I would like to add to the inflation and housing price discussion. I think both parties are making the same point.
A house consists of real assets (timber,concrete,steel,land). With inflation, the price of these assets increase as it takes more money to construct the same house. The higher inflation cycle is caused by easy money flow (low rates) which causes home prices to rise as more money competes for same assets.
Govt interest rates “follow” inflation and as often we have seen, only start going up after inflation is out of control already. It means the asset prices had already risen when interest rates start rising to squeeze out the easy money. This is what happened from 2000-2005 as low rates eventually caused inflation in housing, stock prices, commodity prices, etc. More inflation is caused as eventually greed sets in with a belief that asset prices will keep rising and some assets end up in a bubble. Once that inflation ginnie is out officially then Fed started raising rates in 2004. After sometime, when effect of rate hikes start setting in, it marks the beginning of a deflationary period when asset prices start to fall.
In conclusion, with higher inflation, asset prices rise. This is followed by higher interest rates, that cause asset prices to fall. I believe the Fed still needs to raise rates further to really hurt this liquidity beast and begin a much needed deflationary period.
