Asianautica mentioned Schiff and Greenspan, these two are on opposite ends of the spectrum and Schiff actually hates Greenspan, so we can assume these two are from two camps but lately they have been making the same prediction, high inflation and interest rates in the near future. They actually cite the same rationale behind it, emerging economies like China and others parking their money here. Both feel those days are numbered and China’s costs and standard of living is rising, giving them less to invest here and more spent on consumption themselves, not to mention we look less like a sure thing.
So as a sideliner with cash, but not enough to sidestep needing a mortgage, what’s a boy to do. While I have a recession proof income I don’t have an inflation proof income. Timing R/E prices was an easy task of just monitoring inventory levels and affordability ratios but throw in the real threat of inflation and rising interest rates and this is going to get complicated. The current 30 yr fixed rates don’t jive with either camps prediction, they both see those numbers hitting double digits (greenspan sees an 8% 10 yr t-bill soon). Does waiting for another 10% decline in R/E become moot if mort rates will rise a few points or will the rise in rates further supress the R/E prices and will inflation cause rents to rise, I’m getting a headache. I just extended my lease six months until March 08 where I would re-evaluate despite having an opportunity to buy for the same net payment as rent, if rates rise significantly before then my plans may not work out. I just hope 30 yr rates hold for a few more quarters.
