House prices can fall in real terms even if they don't in nominal terms. I think the is exactly the situation we are likely to see in an environment where the solution to every problem is "stimulus" and "money printer go brrrrrr" in response to the housing market taking a dive.
If the money printer only gives money to asset holders, the inflation will only happen in the asset economy, as opposed to the Main street economy.
This is what we saw with QE in 2008, and what we're seeing now. Asset prices are skyrocketing, while the price of bread is staying more or less stable.
The effects of inflation are somewhat localized at first and the movement of money in the economy matters significantly in terms of the purchasing power of that money for various groups over time.
It's interesting because this looks at inflation from another angle. Some of the central bank money does eventually circulate in the economy but since the money goes to assets first, consumer inflation will always lag behind asset inflation and therefore we have a redistribution effect from the poor to the rich. Unless central banks adopt policies that distribute money evenly among the population they are going to keep distorting the economy.
The central bank cannot distribute money evenly among the population. Congress however can and they basically did albeit selectively based on need with the CARES act which gave citizens direct cash handouts, massive increases to unemployment, and indirectly by funding payroll for small businesses and airlines.
However, they are supposed to maintain a budget and the CARES act alone cost over 2 trillion dollars so they finance deficits by selling US treasury securities. If you look at the outstanding debt, it has grown by about 3.6 trillion dollars worth of outstanding treasury securities from january to august [0]. If you look at the federal reserves asset sheet trends [1], you'll see it grown by up about 3 trillion since january [1] with over 2/3 of that buying those same US treasury securities our government sells to finance the deficit [2].
My point is that if congress had simply decided to pay for all deficits including those direct and indirect payments to citizens this year with printed money and the federal reserve did nothing, we would be basically in the exact same position. Congress is spending to put cash in citizens pockets and the federal reserve is buying up most of the treasury securities that congress is selling to fund that.
The problem is that the fed did not buy those US treasuries.
The fed bought a bunch of crap bonds from the market at above market value (As prior to their involvement, those bonds were tanking), and the people who sold them those bonds then went on to buy treasures and securities.
It socialized the risk, and privatized the profits.
From the current asset sheet in millions of dollars:
Reserve Bank credit: 6,968,229
U.S. Treasury securities: 4,391,505
Mortgage-backed securities: 1,949,547
That puts treasuries and mortgage backed securities as basically their entire balance. Corporate bonds are listed in section 1A as Other securities which Includes non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities, and commercial paper at face value and that comes out to a grand total of 86.729 billion or about 1.24% of their asset sheet.
