Weak Dollar is bullish for Real Estate

[schizo2buyORnot]

Am I the only one that is making the connection between the falling dollar being bullish for RE in the US. Many of the blog Bears tout a weakening RE market and in the next breath tout a falling dollar. Perhaps not in all parts of the country but in places like So Cal which are desirable places for people to live from AROUND THE WORLD, especially Asia, Europe, and India a falling dollar makes RE cheaper.

Doesn’t a falling dollar bolster the price of RE? Answer = all things being equal yes.

[LA_Renter]

I would say yes it would make US property market more appealing to people outside of the US with strong currencies. At least in theory. I think what offsets this is that RE is the most inflated asset in the US economy right now. So its appealing but not that appealing. Also the entire globe has its eyes on the struggling US housing sector. You may see some people take advantage of the weak dollar and buy in Beverly Hills and other nice areas but you won’t see properties being bought with foreign investment for quick appreciation. Everybody knows this market has played out. The sheer size of this bubble offsets the weaker dollar.

[AK]

I think the question’s too complicated to answer at this point.

Weak dollar means higher gas prices (all things being equal of course) which kills property values in outlying areas.

Weak dollar means U.S. wages are lower relative to other countries, which reduces the incentive for immigration.

Since just about everything we buy is imported, weak dollar leaves less $$$ to pay for housing. So FBs will have a harder time making their payments.

A weak dollar would help the manufacturing sector, if we had any to speak of. Maybe in Seattle … people still buy stuff from Boeing and Microsoft.

I see how it could help some industries, such as education and cosmetic surgery.

But yeah, maybe wealthy foreigners will swoop in to buy San Diego and Miami condos at (to them) ludicrously cheap prices.

[temeculaguy]

It’s a very small niche that can live in one country and earn income in another. Ask yourself if the dollar literally doubled against the British Pound tomorrow, would you choose to live in the UK. It wouldn’t be relevent unless you earned your pay U.S. dollars and paid your mortgage in Sterling. Other than lottery winners and the ultra wealthy, very few jobs can handle a commute like that (but there are some). Retirees from Europe won’t flood the U.S. because they would lose their socialized medical care.

[blahblahblah]

Perhaps with rising real estate prices in Bangalore and Hyderabad, Indian programmers will flood to Southern California where they can cheaply telecommute to their offices (now located in India). Maybe some of those “I can never be outsourced because I’m not a programmer!” MBAs and high-level tech guys will move to new careers in lawn maintenance.

[Bugs]

I will say one thing – a weaker dollar means everyone has to pay for those prices being more “reasonable”. Inflation by any other name is still inflation.

[waiting hawk]

easy question to answer. NO it does not. Let’s say someone in UK buys a house that appears to be half price to them here. Then what? He rents it and gets a great (joking) return of half the rent vs mortgage that pays him back crappy butt paper USD currency? Bad investment.

[sdrealtor]

What about the young couple whose family across the pond sends them money to buy a home?

[highpacific]

Weak Dollar only bullish when wages rise…

I don’t buy your argument at all about week doller being bullish.

I think inflation of consumer prices is actually bearish for the housing market (in the short term 1-3 years). Consider these three arguments:

1. Inflation on energy, food, and other necessities takes money out of peoples housing budget and forces them to look for cheaper places to live.

2. Globalization and agricultural advances are keeping costs of necessities somewhat in check. Our dollars are worth less but so are the goods we seek since there is constantly more production (supply) going online worldwide.

and

3. Wage inflation is what really will push houses up. But wages are not rising fast enough and always lag consumer inflation. Besides housing is up so high over fundamentals that inflation would have to soar (super-inflation) to prevent the bubble from continuing to burst in the near term.

Don’t fall for the hype. The level of inflation we are seeing won’t save the housing market. To the contrary it will just excacerbate the forclosure rate 🙂

[greekfire]

The comment about the young couple with parent’s that live across the pond reflects a VERY small percentage of potential buyers.

[Wiley]

The real kicker with inflation is the negative return asians are getting on their treasury bond purchases. When they tire of this they will sell them, causing rates to escalate here. With a debt based, asset economy that is not a good combo. Actaully they could just stop purchasing them to cause the same resulting uptick in rates.

[Cow_tipping]

Yup, gas prices going up $1 will kill outlying areas and bump up the value of my motorcycles. For every dollar gas goes up, I plan to increase the price atleast 500 bucks. Take that you 60 mile 1 way commuters …
Cool.
Cow_tipping.

[no_such_reality]

I think it’s noise. The Euro is stonger, the Pound is stronger, but the Yen is essentially the same, as is the Mex Peso.

By stonger, I mean 8% over the last year. It also happens to be 8% total over the last two years. And of course, flat compared to Q1 2005 Q4 2004, about 8% up compared to 2004 …

Sorry, but it’s not like the magically wek dollar is suddenly making everything more expensive.

It just give the talking heads something to babble about.

[34f3f3f]

I don’t think people from Europe see soCal as an investment opportunity due to the weak dollar, because it still doesn’t offset the inflation appreciably. It’s too far for a holiday home, and immigration is not open to many people. They will tend to look to Florida (weather, beaches, distance etc), or for appreciation in developing markets (Eastern Europe). It can cost $000’s to fly a family backwards and forwards to CA whereas super cheap airline travel in Europe can cost a fraction of that.

[equalizer]

Just wait for the foriegners to start mad buying spree. We know how smart the Japanese investors were buying in 1989 in CA at top and selling at bottom 2-4 years later. Bring in on Chinese, Japanese, Saudia investors. Condos downtown are so cheap!

[Author]

Posts