Housing cost fuels inflation perception

[jimbogumbo]

https://www.msn.com/en-us/money/markets/inflation-isnt-the-real-problem-for-the-us-economy-the-housing-shortage-is/ar-BB1jydXz

[dismalist]

Analytically, the headline makes the classic error of confusing or conflating a change in the overall price level with a change in relative prices. Inflation is a red herring here, diverting attention from the cause of the change in relative prices.

The reason for the rise in house prices relative to other goods is insufficient new supply. This in turn is caused by zoning -- us NIMBY's. Why? Existing homeowners benefit from the rise in house prices and vote accordingly. For new buyers and all renters, tough nuggies. As usual the enemy is us.

Historically, there have been house price booms before, but prices have always reverted to what they were. Not so after 2008.

The cure for all this is more liberal zoning. Will not be adopted locally for the above reason, but perhaps can be done state wide.

Beware the cures mentioned at the end of the article. They are measures to increase demand, not supply. They may well help poorer people get houses, but in the aggregate, they drive up price. The reason for promulgating such policies is the fallacy of composition: If I give one person a housing subsidy, that person benefits. If I give many people a housing subsidy, price rises. It wouldn't rise much or at all if there were more new building.

[jimbogumbo]

Yeah, that's why I added the word perception.