| > If we have a period of inflation, with increased wages (obviously with a painful lag), This isn't obvious, wages can drive as well as lag inflation. > but house prices remain stagnant with no increase, would that bring them down in real terms Yes. > without a “housing crash”? Perceptually? Likely. Substantively? Only if it was a long, slow inflation, and therefore a long, slow real-value decline. > Could this be a “good thing” and does that even make sense? It’s the same thing, requiring the same conditions, as the real-value decline without inflation, but with inflation. What I think you actually want is wages rising greater than both inflation and housing prices (not real decline in housing prices as such), so that wages rise with respect to housing. But the problem isn’t defining the output on that level, anyway, its dealing with housing supply/demand to make either scenario happen. |