property going up - wheres the next hot spot??, page-22

UT...I dont believe you understand how inflation affects house prices....
inflation affects the cost of building a new house....so people than look around to buy a cheaper older house....
but the cheaper older house becomes more popular...and will be compared to the cost of building a new one....
so the asking price of the older house...is compared to the cost of a new home....and rises in value,,,,
we are forgetting about location and land values....

look at it from another angle....inflation means your dollar buys you less....so you need more dollars to buy the same object as a year ago....lets use the 3% tool...

dont buy a house this year....but wait until next year...you will need at least 3% more dollars to buy the same house....
your dollar has devalued ....
but wages have increased in value to cover the 3% lost...
so now you are back in the same position as you were a year ago...
except house prices have risen by 3% and wages have increased by 3%...
house prices do not deflate with inflation...they inflate, and usually at least keep pace with inflation or rise above the inflation rate....