patrick.net

Hi Patrick,
thought it would make for an interesting write up if
someone highlighted the difference between the housing
downturn in the early 80's vs today.

Back then, inflation was rampant and the only way to
stamp it out was through very high interest
rates--which subsequently pummeled the housing market.

Once inflation began to improve, it would have been a
great time to buy property as interest rates
dropped--spurring cheaper credit and ultimately
raising the value of real estate. (As opposed to the
NAR propaganda of "now being a great time to buy"
because interest rates are low)

Fast forward to today. Real estate is in a downward
spiral while inflation rages. The only way to contain
inflation will be a return to Volker-esque interest
rates.

Problem is, housing is in free fall. I suspect what
the Fed is trying to do is create a floor under
housing through inflation, then raise interest rates
to tamp it down.

While many economists see a recovery after another
10-15% devaluation of real estate, no one has touched
the potential long-term implications of current(and
near term) monetary policy and its effect on long term
price appreciation (or lack thereof) in the US market.

The net effect of this policy will be a long,
sustained bottom of prices that will not appreciate
again for years due to necessary increases in interest
rates.

It will not be until AFTER interest rates have been
raised substantially and then begin to reduce again
will we see another substantial increase in the value
of real estate in the US.

Any thoughts on why this hasn't been covered yet?

Best,
Bill A.

#housing