I have a somewhat alternate viewpoint. I fully expect home prices to continue to decline in real terms. The important word here is “real”, which opens the quesion, “what will prices do in nominal terms?” That’s anybody’s guess, and it depends on how aggressive Helicopter Ben gets, and how unwilling to continue holding and absorbing dollars our creditors become. Unfortunately, I feel stuck between a rock and a hard place in this scenario. I don’t want to rent because I could see inflation pushing rents up dramatically. I don’t want to own because, although a 30 yr fixed keeps a big part of my monthly outflows constant nominally and potentially shrinking in real terms, my downpayment will shrink in real terms and my equity will underperform inflation. I may turn out to be wrong in my inflation expectations, or it may take a long time to materialize (that is, it may take months or years of money printing for the new money to ripple through home prices). But I agree with the above post that Bernanke is unlikely to stop printing until home prices resume going upwards. He’ll declare victory, even if milk is $50 per gallon by then…
