Re:Home Price to Income Ratio
by imtringued on Tuesday September 21, 2021 @06:49AM
(#28603731)
At 5% or more interest more than half your money goes to the bank rather than the house. At 0% all your money goes to the house. You can call this inflation if you want but then you are ignoring that you are paying a million dollars for a less than million dollar house because of interest.
The fact that spending and price are decoupled make the inflation idea stupid.
Re:Home Price to Income Ratio
by throw123123123 on Friday September 24, 2021 @01:30AM
(#28638933)
All your money goes to the house seller, remember that.
Inflation implies wages rise at the same rate as the price level. Otherwise it's not inflation. Not every price hike is inflation.
I’ve not seen that definition of inflation. I think you’re thinking of some type of equilibrium/market efficiency theory, where to support higher prices there has to be income growth, which is false especially in the short term where prices can rapidly rise faster than income could realistically keep pace and consumer is just worse off.
It's the standard definition, where inflation is a change in the price level, and the nominal GDP is defined as the real GDP times the price level Y×P. Since GDP is a just a sum of income components, of which one is wages, an increase in the price level implies a proportional increase in wages.
That's why price to income is an interesting metric. High inflation without income rise just means people feel worse off and a correction will occur. Housing, along with many other things, are competing for people's wallet. Interestingly, covid is causing a labor shortage and income to rise at the low ends. I suspect stagnating in the "middle income" ranges.