[quote=5yearwaiter][quote=scaredycat]whatever result screws me is the one most likely to occur. but seriously, does dollar devaluation send house prices up or down?[/quote]
Seriously no one can expect correctly which way house prices would go. If it goes high interest rates though the housing is in high stake – who will buy in such interest rates? I would leave this topic to all of you for the correct guess on housing will go high or low when $ devaluation occur.[/quote]
Here is the problem that I see with housing: demand and interest rates.
While everyone needs a roof over their head, they most certainly do not need an expensive one, and they most certainly do not need a roof that thew “own” or even have to themselves. The more likely scenario, IMO, would be an increase in the number of renters, an increase in the demand for more affordable rentals and an increase in the number of people who are sharing a home. I am seeing this already on the Westside of LA.
The key driver for all of this will be unemployment. We all know that *real* unemployment is closer to 20%, which means we are now reaching depression levels. When layoffs begin to seriously skyrocket next year, we can easily see *real* unemployment reach 30%. At that level, the demand for new and existing homes will literally crater.
Add to that the fact that a USD currency crisis will send bond rates MUCH higher (think the 70s on steroids), and mortgage rates will follow. My parents had an 18% rate on their new home in 1978. If we were to get anywhere close to that now (and we all know that this country is in a much worse position fiscally than we were in the 70s), then the demand for homes will go through the floor.
AND add to this the fact that people will be reluctant to part with whatever cash they do have and hand it over for down payments, which will have to be more than 20% to 30% as banks fail en masse and lending tightens even further. Lastly, think of the number of people who will even have 800 FICOs next year. We’re talking about a rapidly-diminishing group of people who will be assaulted by higher food and energy prices and the fear of layoffs. People are going to hang onto their savings out of a fear of the future. This does not bode well for housing.
Seriously, all around, it is just a very, very grim situation for housing.
Food and energy, on the other hand, will skyrocket. People need food to keep breathing and moving, they will have a hard time sharing food the way they share homes, it is cheaper than housing, people will be focused more on investments in their survival, not their portfolios, and no down payment or credit check is required to purchase food. Oil, which is currently dollar-denominated but likely not for long, will shoot skyward when the dollar collapses. Oil has been too cheap for too long in the US (anyone who travels to Europe, Africa or Latin America knows the *true* price of oil), and we are about to join the rest of the world in that regard.
We are soon going back to the old world, my friends: homes will be viewed simply as shelter (not investments), and more effort will be spent each day simply trying to secure food and energy sources. If this sounds medieval, it is. Welcome to the Dark Ages. The good news is that we won’t be there forever, and if you are smart enough to make it through the transition healthy and with some *real* wealth in hand, then you will be able to reap the many opportunities that will present themselves after the reset button is pushed and we finish re-booting this country.
