Grocery prices are soaring. Gas prices are soaring. Hell, most prices are soaring. Thank you Helicopter Ben.
But about the only thing that ISN'T soaring is the price of homes. In the middle of this rampant (consumables) inflation and dollar destruction, you have historic (asset price) deflation. Just as most HP'ers have predicted.
Eventually though, home prices will stop falling. Probably quite some time from now, when the historic housing P/E ratio is restored, confidence is somewhat restored, pre-bubble prices are back, and it's cheaper to 'own' than rent.
And when that happens, and home prices stop falling or god forbid start going up, the NAR and the few realtors who are left will start saying "home prices stable!". But when you factor in the wild inflation underway (the real inflation, not the government-reported inflation), real home prices will still be in freefall, and the crash will have been much worse than people think, and the combination of flat incomes, job losses and rising consumable and service prices will be devastating.
Here's a new editorial on the inflation solution, which is well underway I believe. Meanwhile, got gold? Got food?
The Inflation Solution to the Housing Mess
The policy alternatives in the post-housing-bubble world are painfully unpleasant. In my view, the least bad option is for the Federal Reserve to print money to help stabilize housing prices and financial markets.
Yes, use reflation to soften the pain for Main Street and Wall Street. If instead we let housing prices fall another 25%-30% – as predicted by the Case-Shiller Home Price Index – it's almost certain that Washington will end up nationalizing the mortgage business.
While there is a substantial risk that inflation may rise for a time – this would be the policy goal – monetization is more easily reversible than nationalization of the mortgage market.