Kipp:
Good post.
I reiterate though, that at least IMO, I fail to see how declining housing prices will contribute (other than microscopically) to deflation.
The "proof" is that when they were going wild for all those years, they didn't cause INFLATION. And, it would be more likely that rapidly rising prices would cause inflation than less rapidly decreasing prices would cause deflation. The reason is because those rapidly rising prices spurred enormous additional spending - not to mention increased housing payments for the vast majority of buyers.
In the case of declining property values, that usually results in NO SALES. That does not equate with lower monthly rates or less spending. People still spend the same amount on their monthly mortgage.
In any event, I see no reason why home prices would be factored into any inflation/deflation debate - except as an afterthought.
Len
News 
Market Data 
Discover 
