I am hearing people stating that the RE market is ‘on fire’ right now, but I just don’t see that. I know my sample size is comparatively small. An example is a house near me. It is off over 30% from market price.. many lookers, no offers.
As for inflation. Inflation involves more than just M0 (currency). You really want to look at M3 + value of leverage-able assets (ie. RE). We just took a huge hit in the price of homes (shutting down the home ATM). The drop in dollar valuation of near-liquid and liquid assets is highly deflationary. The current ‘printing’ going on is offsetting some of the loss at M3.. but not all.
Here is another factoid. Many people think that the TARP funds are a give away. Take a look at the earnings report from BofA. They just paid the gov $402Mil of interest on the $45B of TARP funds it received. I don’t think my calcs are wrong.. It comes out to something near a 3.6% interest rate. That is definitely not free money, thought it is cheap. Interesting point is that it is costing the fed about 2.5% or less in terms of paying out on the treasury bills were sold to get the TARP money.
