[quote=Ren][quote=bearishgurl]If “Dr. Feelgood” thinks a $1.5M property is now only worth $1.4M, it is because that’s all Ms. Starlet, Mr. CEO (ret), and Mr. Nobel Prize were recently willing to pay in that area. These values have little to NOTHING to do with local worker-bee wages and current mortgage interest rates.[/quote]
But they do, at least indirectly. When millions of worker bees pay 40% less (or whatever) for housing farther inland (due to years of mass unemployment, foreclsoures, etc), those price drops put some downward pressure on coastal properties. That’s what I meant by outside influence. I’m sure it’s countered somewhat by the local salary increases sdr mentioned, but how much is anyone’s guess.[/quote]
Exactly, Ren.
Also, remember that credit expansions affect wealth in other ways, too. The price of stocks, bonds, commodities, etc. will go up (and business profits will likely go up as more customers have access to greater amounts of credit) as credit expands, so a wealthy person’s “wealth” will increase and enable them to pay more for a house as they can liquidate some of their other holdings and use that money to buy a house with cash.
