So if the U.S. dollar is 10-15% lower than 2005, than does it mean….

[Coronita]

So the median home prices today are 5% lower than 2005 peak prices. But since the U.S. dollar today is 10-15% lower than what it was in 2005, doesn’t it mean that the median home value effectively have declined by 15-20%?

Ha ha ha.. Just kidding. That’s why I’m not an economist.

[bubble_contagion]

Absolutely correct. That is the same reason all employers have increased salaries by 15% plus inflation since 2005. You did get or gave a 25% raise since then, didn’t you?

[cr]

It means now is a great time to buy a home with no money down, a 125% financed, negative amortization, variable-rate, interest only, stated income loan, where you inflate your income by 50%, but then blame your broker for allowing you to do it, and file a lawsuit against them so you can absolve yourself of any responsibility or consequences of your reckless actions.

Ahhh…. The American Dream.

[hipmatt]

It means now is a great time to buy a home with no money down, a 125% financed, negative amortization, variable-rate, interest only, stated income loan, where you inflate your income by 50%, but then blame your broker for allowing you to do it, and file a lawsuit against them so you can absolve yourself of any responsibility or consequences of your reckless actions.

Ahhh…. The American Dream.

LOL!!! I love it. 

[Anonymous]

Technically, any dollar denominated asset that hasn’t seen an increase to match this decrease is actually falling in value. But, since wages haven’t caught up, prices still need to drop. Supply and demand still trump the currency problems.

[PerryChase]

That means that foreigners who own US assets are loosing their asses in America. They’ll likely demand higher interest rates to keep lending us money. So I think that will mean higher mortgage rates despite what the Federal Reserve might do. Do you remember when mortgage rates were falling as the Fed were hiking rates? The reverse might happen this time.

[little lady]

“Do you remember when mortgage rates were falling as the Fed were hiking rates? The reverse might happen this time.”

Do you mean to say that if the fed were to lower rates, mortgage rates might go up?

[Anonymous]

Do you mean to say that if the fed were to lower rates, mortgage rates might go up?

Mortgage rates would be going up, then the fed would lower the overnight rates, but mortgage rates would still rise. If the currency is falling then there is more risk for foreigners buying MBS – they would demand a better return on this and in turn, would push up mortgage rates.

[PD]

The general public thinks there is a direct, hard link between what the fed does and mortgage interest rates. That isn’t the case. It has a affect but there are other things at play. I also think that the fed could lower rates and then have the mortgage rates increase. The fed knows this to be the case, however. Maybe they won’t lower rates in attemp to save housing (and have it not work) because they know the dollar will get crushed. Just polishing my crystal ball…

[Ash Housewares]

“Maybe they won’t lower rates in attemp to save housing (and have it not work) because they know the dollar will get crushed.”

I’m not convinced they care about saving the dollar. Inflation is a debtors best friend. Get ready for $30,000 Honda Civics and $45,000 Accords.

[SHILOH]

If the Chinese bought the mortgage securities and will raise rates to prevent their losses, prices will have to come way down for the “average” person -in SD making $50K (median) to afford the “median” home price.

But since “median” is not a good measure – what is the AVERAGE income for 50% of SD households? Does anyone know that number?

[PerryChase]

I think that national security concerns require a fairly strong dollar. We can’t play the devaluation card like other countries or the Dollar would loose its reserve status. That would be a catastrophe.

We have a national interest in maintaining a fairly strong dollar. Remember America is the only country fairly insulated from currency movements because commodities such as oil are denominated in Dollars. Our corporate and government debts are also in dollars.

What caused the 1997 Asian financial crisis (and the crises in Mexico, and Latin America) was that their debts were in dollars but their currencies were crushed. Their debts doubled practically overnight.

I don’t think we can devalue our way of this mess. If anything we’ll push harder for China to revalue the Yuan.

[(former)FormerSanDiegan]

SHILOH – Not sure which 50% of households are you talking about. I think you may want to know what is the mean income of the top 50% of households. Not sure where to find that, but the census bureau has some useful breakdowns of income levels.

For example about 24% of households in San Diego County had incomes above 100,000 *

According to census bureau, in 2005 here are the number of housholds at each income level in SD County (2005 dollars):

Total households….1,040,538

Less than $10,000…….60,252
$10,000 to $14,999……47,770
$15,000 to $24,999…..103,145
$25,000 to $34,999…..102,774
$35,000 to $49,999…..148,111
$50,000 to $74,999…..196,663
$75,000 to $99,999…..135,613
$100,000 to $149,999…148,257
$150,000 to $199,999….50,316
$200,000 or more……..47,637

Median household income (dollars): 56,335
Mean household income (dollars): 75,060

* source: http://factfinder.census.gov/home/saff/main.html?_lang=en

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