Housing booms under different inflation scenarios.

http://web.stanford.edu/~piazzesi/illusion.pdf

Figure 1: Housing booms under different inflation scenarios

smart households illusionary households 1970s expect high inflation (high nominal rate) perceive low real rate perceive high real rate =⇒ borrow and buy houses =⇒ lend

2000s expect low inflation (low nominal rate) perceive high real rate perceive low real rate =⇒ lend =⇒ borrow and buy houses