Why have housing costs rose so much in the past decades?
In: Economics
Since no one else mentioned it yet.
Inflation, and the perceived value of your currency. Most people have the perception the price of precious metals go up or down, when it is their dollar that is increasing and decreasing.
Linked is a [gold](https://www.bullionvault.com/gold-news/files/price-of-gold.png) price chart, [copper](https://static.seekingalpha.com/uploads/2011/9/3/379295-131510367848088-Jim-Pyke.jpg), [silver](https://hubertmoolman.files.wordpress.com/2012/09/silver-long-term-chart1.png) one, and [platinum](http://files.dailywealth.com/images/NN-519532189_HWN4OKLD9W.png)
To compare, here is a [US](https://www.orreia.net/Images/U_S_HousingPriceIndexSince1900.jpg) and a [UK](http://www.fullertreacymoney.com/system/data/images/2014/January/February/14th/UK-Nationwide-Avg-House-Price-2014-02-14-chart.png) housing price chart over the decades.
You will notice they all follow the same general curves. This implies that housing supply and demand is not the primary problem, it is the value of the currency.
There are too many variables to keep this short. But fractional reserve banking likely plays a part. Banks can lend out more money than they have, they only need a ‘fraction’ of the money in their coffers to loan out a mortgage.
Is this a recipe for disaster? Yes, because it is mathematically unsustainable to do this on paper, especially when interest is charged on it but that is another topic.
Latest Answers