[quote=Diego Mamani][quote=jficquette]Be patient. Prices are going a lot lower.[/quote]
In real (inflation-adjusted) terms, I agree. But dollar (nominal) prices? I’m not so sure. The Fed and the Treasury have pumped unheard of amounts of liquidity into the system to save the skins of all those responsible for the mess we are in. True, other jobs were saved too (unemployment would have been far worse without the many bailouts), but I think we’ll pay a very high price for it.
The price? High inflation! Those of us who were responsible with our finances, who didn’t drink the kool aid, who lived within our means, who sold our real estate in 2005-2006, and who have savings, will be screwed. Our savings will erode and depreciate as inflation takes off. Talking heads on TV, including Prof. Alan Blinder say that inflation is not a problem b/c the Fed will reverse the liquidity injection once the economy recovers.
I think Blinder is naive. If it were so easy to control inflation, why did it get so out of hand in the 70s? Young people often buy the fallacious argument that our elders were stupid and that we are smart. That the 1970s Fed was inept, but the Fed of 2010-2015 will be accurate and infallible. That is a pollyanish assessment! And that’s why gold is so expensive: the market expects dollars to have less purchasing power in the medium and long term. Too late to buy gold now… but maybe I should start considering re-entering the real estate market. Once inflation takes off, as it did in the 70s, you’ll wish you had your savings in either stock (provided the issuing corporation doesn’t go bankrupt), or real estate. Holding on to cash will be (or already is) suicidal.
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I believe that the loan Fannie Mae guidelines that they use now want your payment to gross income ratio to be 30% or under or so.
At 6.5% interest that means for every $100k in loan amount you need income of about $30k.
Median income in San Diego is around $60k or so which equates to $200k loan.
Real Estate in SoCal has been just one big Ponzi Scheme that the lasted for about 30 years. Finally it’s reached the point where the threshold to play the game is too high for the entry level people.
Another problem is interest rates. They have been too low too long and will eventually swing the other way and even go to far. Housing prices will fall as the rates rise.
The other problem is the state government. The state is going to go BK unless the Feds bail us out. No telling how much more in taxes we are going to have to pay.
Another problem with the state is it is so anti business. What big company in their right mind would move here now? Taxes, fees, permits etc etc.
I just dont’ see the income level, job generation needed to keep the prices inflated here. Inflated relative to what the average wage here is.
