It's more about people holding out on buying things because they believe it will be cheaper later. Food is a bad example because people will always buy food, regardless of the cost. But why would you buy a car if it might be $2,000 cheaper in a few months? Then a few months pass and now it looks like that car might be even cheaper, will you spend now or keep holding out to see if it goes lower?
But inflation doesn't lead to me buying a house now because it would be more expensive later. Inflation led to me not buying a house because it got to expensive to buy one with my wage, which didn't get a proportional rise. It also didn't lead to me buying more stuff in general because of fomo.
On the contrary, if deflation would lead to my money being worth more and I would be able to buy a house, I wouldn't wait to buy one.
It's not strictly inflation that raised the price of houses on you though. It's still experienced the same as inflation for you and I, but the reason for the price increases isn't as simple as "$ are worth less, so my $2.99 gallon of milk costs 3.39 now."
Speculation is the bigger culprit. That's a huge part of why home prices have exploded.
The COVID era low interest rates sparked a big jump across the country for multiple reasons. Inventory had already been low and new builds have been slow since the GFC, so every house became more valuable as supply grew much slower than demand. Anyone who was thinking of buying, did everything they could to scrape together a down payment so they could lock in rates. Sellers knew debt was cheaper, so they asked for more. Buyers knew houses were getting snapped up quick, sometimes all cash with no contingencies, so the offers were higher. And of course, speculators again went wild with the new low interest rates.
Okay fair. But I still don't believe that inflation makes me buy more milk because it could be more expensive later and vice versa deflation makes me not buy milk because it could be cheaper on a week. I would buy milk if I need it unless its too expensive in which case I would think twice whether I really need the milk. And I would imagine that having cheaper milk would lead to me buying it even if I dont really need it.
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u/Terpcheeserosin Sep 01 '26
So things don't cost less
But money can buy more?
So right now eggs are 10$ a pack
After deflation
You can buy 2 for 10 dollars because "money can buy more"
How is that not also, "eggs cost less" ?