patrick.net

tatupu70 says

Yes, and if aliens land on earth tomorrow and hand out free jelly beans to all, then housing prices might rise. OK–once more. If you believe history is any guide, then your above statement has been shown to be utterly false.

If history were any guide, we would not have seen home prices drop like we had in the past four years. Great counter-argument.

tatupu70 says

First off–interest rates have very weak to no correlation with even real housing prices. And b–why do you care what real housing prices do? When you make a rent vs. buy decision, you do so based on nominal prices, not real prices.

That is like asking why we measure anything in terms of real or nominal dollars. Because it's the time value of money. It's like making $50k today and in 20 years when you are making only $60k (while inflation over that time has gone up 40%) you think you're actually making more than you were before. It's a relative indicator. You're either missing the point by miles, or deliberately trying to avoid it.

klarek says

That is like asking why we measure anything in terms of real or nominal dollars. Because it’s the time value of money. It’s like making $50k today and in 20 years when you are making only $60k (while inflation over that time has gone up 40%) you think you’re actually making more than you were before. It’s a relative indicator. You’re either missing the point by miles, or deliberately trying to avoid it.

I'm neither missing the point nor avoiding it. Unless you are evaluating a house purchase solely as an investment based on appreciation--which would be very stupid--then I don't see what the point of using inflation adjusted prices is. If you buy a house as an investment, you do so because you can cash flow based on rent--not because you expect the appreciation to outperform other investments.

And if you do a rent vs. buy calculation you'd damn well better include inflation in your numbers. Because that's one of the main advantages of owning-- your payment stays the same while inflation increases rent, wages, and the home value.