Where Did All the Inflation Go?: When Will the Real Estate Market Recover

Abstract

This paper considers whether real estate will ever again be a good place for the average American homeowner, investor, or speculator. Looking at the rate of change in real estate prices over the past few decades and the rate of inflation one sees a correspondence. The faster the rate of change in inflation the faster the rate of growth in real estate prices. In addition, real estate price changes are more volatile than overall price changes; in general historical inflation in housing is higher than inflation for all goods; and starting with the onset of the crisis, discordance develops with housing prices falling while overall prices remain relatively flat.