Great Perspective on Future Housing Prices and Inflation…
Posted 02-20-2009 at 05:47 PM by GregTraub
I just came across this article and thought it gave an interesting historical perspective on the price of housing and how inflation has a pretty clear role in the future of today’s housing.
Read the original article here: Commentary: House Prices Will Rise Greatly over the Next Few Years, Buy Now | RISMedia
For those that would rather have the cliff notes (why would you be reading my blog if you did though? I think I tend to get long winded for a blog!)….
The author basically goes through his memories of housing prices and inflation from the 50’s through to the early 80’s. From his father bought a home for a mere $13,000 in the 50’s and a good income was about $10,000, to when he bought his first home in the 70’s for about $33,000 and that 10K income was equivalent to about 50K, and inflation was in the 20% range!
“Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!”
This quote was what gave me the “I get it” moment for the point of the entire article. The author was simply saying his home actually wasn’t worth anything more than when he bought it, it’s just that the money used to buy it was worth so much less. Inflation was the real key to home price appreciation in those past markets.
Previously my thoughts where that the housing market would stabilize at affordable levels after over correcting a bit on the downside….and here in Orlando that day was sooner rather than later. Then once things stabilized housing prices would stay flat for some time to come. However, factoring the coming bout of inflation I also think is inevitable after pumping TRILLIONS upon TRILLIONS of dollars in “stimulus” I’m starting to think that flat housing price scenario may not be so. My home may never regain the true value it had last year at 30% above what it is now, but now I at least have hope that although my value will not go up, the dollar amount I can sell it for later may! (of course I’m ignoring that really high inflation would be bad for me and you in other ways but you get the point)
A pop in real estate prices after the true bottom has come may actually be more likely than any of us expected. In such a case, it would give me more confidence buying a home now or soon, rather than later. Not because it will make me rich by being worth twice as much in a few years, but because at the very least real estate has ALWAYS been proven a great hedge at keeping that invisible tax called inflation from eating up net worth.
Just some food for thought…
Greg Traub
www.MyOrlandoHomeExpert.com
Read the original article here: Commentary: House Prices Will Rise Greatly over the Next Few Years, Buy Now | RISMedia
For those that would rather have the cliff notes (why would you be reading my blog if you did though? I think I tend to get long winded for a blog!)….
The author basically goes through his memories of housing prices and inflation from the 50’s through to the early 80’s. From his father bought a home for a mere $13,000 in the 50’s and a good income was about $10,000, to when he bought his first home in the 70’s for about $33,000 and that 10K income was equivalent to about 50K, and inflation was in the 20% range!
“Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!”
This quote was what gave me the “I get it” moment for the point of the entire article. The author was simply saying his home actually wasn’t worth anything more than when he bought it, it’s just that the money used to buy it was worth so much less. Inflation was the real key to home price appreciation in those past markets.
Previously my thoughts where that the housing market would stabilize at affordable levels after over correcting a bit on the downside….and here in Orlando that day was sooner rather than later. Then once things stabilized housing prices would stay flat for some time to come. However, factoring the coming bout of inflation I also think is inevitable after pumping TRILLIONS upon TRILLIONS of dollars in “stimulus” I’m starting to think that flat housing price scenario may not be so. My home may never regain the true value it had last year at 30% above what it is now, but now I at least have hope that although my value will not go up, the dollar amount I can sell it for later may! (of course I’m ignoring that really high inflation would be bad for me and you in other ways but you get the point)
A pop in real estate prices after the true bottom has come may actually be more likely than any of us expected. In such a case, it would give me more confidence buying a home now or soon, rather than later. Not because it will make me rich by being worth twice as much in a few years, but because at the very least real estate has ALWAYS been proven a great hedge at keeping that invisible tax called inflation from eating up net worth.
Just some food for thought…
Greg Traub
www.MyOrlandoHomeExpert.com
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