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Rich ToscanoKeymaster[quote=kcal09]Savings accounts are not yielding anything and the stock market is too risky for me. I’m sitting on enough cash to buy an investment property outright without going through the hassles of applying for a mortgage.[/quote]
That may be the case right now, but it makes more sense to think about what savings accounts will yield (or whether other options will be too risky) on average over the entire duration of the mortgage, not just right now.
Rich ToscanoKeymaster[quote=kcal09]Savings accounts are not yielding anything and the stock market is too risky for me. I’m sitting on enough cash to buy an investment property outright without going through the hassles of applying for a mortgage.[/quote]
That may be the case right now, but it makes more sense to think about what savings accounts will yield (or whether other options will be too risky) on average over the entire duration of the mortgage, not just right now.
Rich ToscanoKeymaster[quote=kcal09]Savings accounts are not yielding anything and the stock market is too risky for me. I’m sitting on enough cash to buy an investment property outright without going through the hassles of applying for a mortgage.[/quote]
That may be the case right now, but it makes more sense to think about what savings accounts will yield (or whether other options will be too risky) on average over the entire duration of the mortgage, not just right now.
Rich ToscanoKeymasterRich ToscanoKeymasterRich ToscanoKeymasterRich ToscanoKeymasterRich ToscanoKeymasterJune 14, 2011 at 9:29 AM in reply to: Robert Shiller – home prices could slide for 20 years? #703241Rich ToscanoKeymasterYes, that’s a very insightful question Gandalf.
I try to make the distinction between a 70s-style wage-driven inflation and a currency-driven inflation, which as you note can take place in the absence of wage growth or economic growth. I think a currency driven inflation is most likely what we will face at some point.
You are completely correct to note that these would have very different impacts on housing. Homes are (to borrow a phrase from Gregor Macdonald) call options on future wage growth. In a currency driven inflation, prices of stuff people need to by would likely be going up faster than wages. This would actually leave less money to buy houses, which along with rising interest rates would put downward pressure on home prices.
However, at the same time, the declining value of the currency will provide upward pressure on the nominal price of everything. I think that would likely prevent a “collapse” in prices in US$ terms. This is why my forecast/guess is that in the years ahead, home prices will continue to decline in real terms, but will be relatively stable in nominal terms. (They might decline further, but I just don’t see another nominal collapse or crash leg as being very likely).
Of course, this depends on the severity of how bad wages are compared to inflation, but I’m making the assumption that it won’t be as bad as what you saw in Argentina or something like that, simply because even despite all the recent damage we still have a much more productive economy than those countries.
June 14, 2011 at 9:29 AM in reply to: Robert Shiller – home prices could slide for 20 years? #703338Rich ToscanoKeymasterYes, that’s a very insightful question Gandalf.
I try to make the distinction between a 70s-style wage-driven inflation and a currency-driven inflation, which as you note can take place in the absence of wage growth or economic growth. I think a currency driven inflation is most likely what we will face at some point.
You are completely correct to note that these would have very different impacts on housing. Homes are (to borrow a phrase from Gregor Macdonald) call options on future wage growth. In a currency driven inflation, prices of stuff people need to by would likely be going up faster than wages. This would actually leave less money to buy houses, which along with rising interest rates would put downward pressure on home prices.
However, at the same time, the declining value of the currency will provide upward pressure on the nominal price of everything. I think that would likely prevent a “collapse” in prices in US$ terms. This is why my forecast/guess is that in the years ahead, home prices will continue to decline in real terms, but will be relatively stable in nominal terms. (They might decline further, but I just don’t see another nominal collapse or crash leg as being very likely).
Of course, this depends on the severity of how bad wages are compared to inflation, but I’m making the assumption that it won’t be as bad as what you saw in Argentina or something like that, simply because even despite all the recent damage we still have a much more productive economy than those countries.
June 14, 2011 at 9:29 AM in reply to: Robert Shiller – home prices could slide for 20 years? #703928Rich ToscanoKeymasterYes, that’s a very insightful question Gandalf.
I try to make the distinction between a 70s-style wage-driven inflation and a currency-driven inflation, which as you note can take place in the absence of wage growth or economic growth. I think a currency driven inflation is most likely what we will face at some point.
You are completely correct to note that these would have very different impacts on housing. Homes are (to borrow a phrase from Gregor Macdonald) call options on future wage growth. In a currency driven inflation, prices of stuff people need to by would likely be going up faster than wages. This would actually leave less money to buy houses, which along with rising interest rates would put downward pressure on home prices.
However, at the same time, the declining value of the currency will provide upward pressure on the nominal price of everything. I think that would likely prevent a “collapse” in prices in US$ terms. This is why my forecast/guess is that in the years ahead, home prices will continue to decline in real terms, but will be relatively stable in nominal terms. (They might decline further, but I just don’t see another nominal collapse or crash leg as being very likely).
Of course, this depends on the severity of how bad wages are compared to inflation, but I’m making the assumption that it won’t be as bad as what you saw in Argentina or something like that, simply because even despite all the recent damage we still have a much more productive economy than those countries.
June 14, 2011 at 9:29 AM in reply to: Robert Shiller – home prices could slide for 20 years? #704077Rich ToscanoKeymasterYes, that’s a very insightful question Gandalf.
I try to make the distinction between a 70s-style wage-driven inflation and a currency-driven inflation, which as you note can take place in the absence of wage growth or economic growth. I think a currency driven inflation is most likely what we will face at some point.
You are completely correct to note that these would have very different impacts on housing. Homes are (to borrow a phrase from Gregor Macdonald) call options on future wage growth. In a currency driven inflation, prices of stuff people need to by would likely be going up faster than wages. This would actually leave less money to buy houses, which along with rising interest rates would put downward pressure on home prices.
However, at the same time, the declining value of the currency will provide upward pressure on the nominal price of everything. I think that would likely prevent a “collapse” in prices in US$ terms. This is why my forecast/guess is that in the years ahead, home prices will continue to decline in real terms, but will be relatively stable in nominal terms. (They might decline further, but I just don’t see another nominal collapse or crash leg as being very likely).
Of course, this depends on the severity of how bad wages are compared to inflation, but I’m making the assumption that it won’t be as bad as what you saw in Argentina or something like that, simply because even despite all the recent damage we still have a much more productive economy than those countries.
June 14, 2011 at 9:29 AM in reply to: Robert Shiller – home prices could slide for 20 years? #704437Rich ToscanoKeymasterYes, that’s a very insightful question Gandalf.
I try to make the distinction between a 70s-style wage-driven inflation and a currency-driven inflation, which as you note can take place in the absence of wage growth or economic growth. I think a currency driven inflation is most likely what we will face at some point.
You are completely correct to note that these would have very different impacts on housing. Homes are (to borrow a phrase from Gregor Macdonald) call options on future wage growth. In a currency driven inflation, prices of stuff people need to by would likely be going up faster than wages. This would actually leave less money to buy houses, which along with rising interest rates would put downward pressure on home prices.
However, at the same time, the declining value of the currency will provide upward pressure on the nominal price of everything. I think that would likely prevent a “collapse” in prices in US$ terms. This is why my forecast/guess is that in the years ahead, home prices will continue to decline in real terms, but will be relatively stable in nominal terms. (They might decline further, but I just don’t see another nominal collapse or crash leg as being very likely).
Of course, this depends on the severity of how bad wages are compared to inflation, but I’m making the assumption that it won’t be as bad as what you saw in Argentina or something like that, simply because even despite all the recent damage we still have a much more productive economy than those countries.
Rich ToscanoKeymasterZeitgeist, I admonished the OP for starting a thread that violates the political flamewar policy of this site, and the thread mercifully winds down. But you somehow think it’s ok to come back a year later and resurrect it?
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