New answers tagged long-run
3
First, notice that comparison of the change in the house prices with risk-free rate doesn't tell you anything about the change in the real house price. You need to compare the change in nominal house prices with the inflation rate to see if the real house price increases.
There are many reasons why supply and demand forces will probably not let the real ...
5
As I read your question, you actually ask two distinct question, one whether house prices can be assumed to have positive trend, and one about whether population or something else causes prices to rise.
Is it simply a mistake to assume that house prices tend to rise?
Yes, this would be a mistake. There is no inherent economic reason why real house prices, ...
4
"conventional wisdom seems to back up the idea that real house prices tend to increase over time"
Not clear that's correct. See, for e.g., "House Prices and Fundamentals: 355 Years of Evidence" by Brent W. Ambrose, Piet Eichholtz, Thies Lindenthal. It was covered in this story
0
They cannot rise in the long term. Indeed, as objects that will deteriorate over time, they should decline in value continuously in the absence of alterations. They not only deteriorate but, even if maintained well, also become obsolete. A late 18th-century log cabin would be nearly impossible to sell except as a campsite or for its purely historical ...
0
I would recommend you to not take that sentence from the textbook literally. This is because in that scenario, when the textbook says in the short-run firms can't enter or leave, it is implying that in the long-run, there is enough time for firms to enter and leave. The reason firms need to enter and leave is because of costs and profits. If firms from the ...
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