Question: How does inflation affect home prices?

Answer:  Inflation means that the value of the dollar is dropping over time, which means it will take more dollars to anything from a pound of fruit to a residential home.  The good news for home-owners is that when the interest rate of a mortgage (as with a fixed-rate mortgage), inflation actually means that you're paying with the same number of less-valuable dollars each month, but the cash value of your home may still be rising.  If the cash value of your home rises faster than the rate of inflation, they you'll gain more spending power.  That right there is a great reason to be a long-term home owner.