It is the strangeness of the lack of wage inflation since 1990.[/quote]
That’s for new homes only. Which is a minority of the overall home sales.
That was my point we didn’t need wage inflation because people we’re perfectly comfortable expanding debt and leverage in a falling rate environment. Home prices could continue to go up without the expansion in wages because the monthly payment fell with the lower rates.
So the question is what happens when rates go up. If wages continue to experience low inflation then home prices will fall. If wages do experience the inflation you seem to think is a solution then you would expect rates to increase even faster. Of course if the rates expand at a rate greater than wages then home prices still fall. It’s going to be a negative feedback loop that will trap people in homes that are purchased now. They won’t be able to get that monthly payment again and they won’t be able to sell at a reasonable profit until they pay down a lot of the debt. We had falling rates as a trend for 30 years. We had a positive feedback loop to expand debt into that environment. When that changes assets that are bought and sold with leverage will suffer.[/quote]
