17 August 2006

Why Housing Prices Have Gone Up and Up

There has been quite a lot of speculation about why house prices have risen so much in the last decade. I think that perhaps the most overlooked cause is Costco.

People now buy in bulk. They get 48 rolls of toilet paper, 32 cans of diet coke, 4 lbs of spinach, etc. Why? Because thanks to Costco bulk is so cheap. Or at least it seems that way. But what happens? People began to feel crowded. They find that their living quarters are cramped. They are hemmed in by bales of foodstuffs, paper supplies, and appliances. They begin to shop for a larger living space and as more people are in search of bigger homes, demand drives up prices, spiraling upwards.

The net effect? Food prices drop by about 5%. House prices rise by about 50% Our discretionary income falls and our weight rises. All because of Costco.

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