The old adage of something is worth what someone is willing to pay also applies here..

RE has always been an excellent inflation hedge, some would argue that it’s better than gold because you can leverage it more.. I won’t go into that discussion, but, I tend to agree that during inflationary times, RE is a good place to be.

In a deflationary environment, CASH IS KING, and IMO we have just finished our deflationary scare, but, what is still keeping RE prices low are the problems with bank financing.. If no one can qualify for a loan, then no houses are getting bot/sold.. if no houses are getting exchanged, then the prices go down due to comps.. so, housing prices go down, without INflation or DEflation in that scenario.. Remember there are 3 entities involved in any housing purchase, the buyer, the seller, and the bank.. all 3 are equal partners.. if one of those 3 legs is broken, then the housing market gets severely affected.. Right now, the banks are broken.

So, if the banks stay broken, then housing will remain at low values, even in an inflationary environment.. BUT, once the banks get fixed, and inflation sets in, then watch out!!