I was guarded in my comments and limited it to just those cities mentioned in the CNN article. About rest of the markets I am as bearish as any Piggingtonian. (especially Inland Empire – my idea would be for the HUD to take over all distressed properties at some nominal price like $80 – $100/sqft and convert them into public housing and rent it back to the newly “homeless”. Much better than Jim Cramer’s idea of plowing them over) However, for the cash rich (multi-millionaire kind) who want to protect their wealth from the inevitable $ devaluation, prime real estate in those international gateway cities can be a conservative asset. Being international in character protects them from the vagaries of domestic crises.
When it comes to $ collapse, I am not buying the fast “total loss” scenario advocated by some folks (like partypup). I think FED will be smart enough to engineer a gradual devaluation of about 5% per year (on average; peak values may approach up to 10%) over the next 10 – 20 years. Our international linkages, primarily, hordes of Eurodollars, Petrodollars, Sino/Japanese dollars etc., act as a buffer against US $ becoming Mexican Peso. (In Game Theory, this situation is called Prisoners Dilemma. U.S. holds the rest of the world as hostages in a monitory sense. If anybody tries to take advantage as the first mover, everybody will be ruined. That should save us – just like MAD did during cold war!)
Bottom line is, we have to lose at least 50% of the value of $ before we stop becoming a net consumer of global capital. (A rather harsh way of understanding that is – nationally, the average American’s living standard has to fall by half before investors find it doesn’t pay to produce abroad and import for domestic consumption).
