Can real estate be a good proxy for the *true inflation rate and perhaps even justifiably exceeding it? (*The real inflation rate and not the doctored CPI numbers) When home builders are building a house, all the man hours of construction and building material will always be required. So as inflation rises, so should the value of an existing home. But where I believe things get out of whack is when there is great demand for land, pushing land values skywards in a given area with virtually no new or existing supply since no new land is being created in those same areas. ie. Manhattan, San Francisco, etc. In addition, the problem is made worse by zoning restricting densities, so the builders are forced to purchase a minimum amount of land per unit, and passing these costs on to homebuyers. But in the end, while land values may have high variances in the short to mid-term (boom,bust) over the long run, real estate land values should do two things: grow at atleast inflation, and grow at a rate in order to have supply=demand, considering there is no new land being created in the prime markets and that the desire and buying power for getting into those prime markets continues to increase. Let's say that we are on the verge of a Real Estate bubble in America imploding. Even if prices do collapse, the high demand for the prime markets will still exist if not increase, however the supply will remain the same. Also given the high real-inflation rate we see in America, it should not take too long for prices to return to pre-bust levels and this time justifiably.