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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Elroy Jetson who wrote (77800)4/16/2008 7:53:50 PM
From: koan  Read Replies (1) of 116555
 
Elroy: "If incomes rise due to inflation or economic growth, then real estate prices will not decline quite as far as they would have otherwise."

koan: Ok, that is all I am saying! However, you are leaving out the increased cost of building a new house. You cannot emit that variable.

Elroy: "The long-term relationship between income and real estate prices is inviolate."

koan: "I agree". But as areas of any state start finding demand for new houses, the new house price will have to reflect the inflation adjusted prices of new land and commodites. It may mean a smaller house or less cuts on the roof to match income; or it may mean spending he money aunt Lilliy left in her will for a higher down payment.

Alberta cannot find enough wokers and real estate is high I believe because the oil sands are expanding so much.

Alaska is going to need to build lots of new house soon as people come up here looking for work. Sort of a second grapes of rath migration from south to north. We will have almost unlimited money going forward and will need tons of capital expenditures. Plus the gas line and a new oil line are needed."

Elroy: "In the short-term the rise in real estate prices have far exceeded the rise in incomes."

koan: "agree".

This substantial imbalance will correct in Alaska and all other areas where this has occurred.

koan: disagree. In psychology they have a concept called an intervening variable, which I am sure you know about. The intervening variable is our massive liquid wealth. As mentioned, real estate prises will soon rise as their will be an increased demand for housing as people migrate north looking for work.

Incomes will have only so much to do with who buys. People have savings or profits from the sale of other houses to put lots of money down on a house.

I have found the environment, and supply and demand, affects housing prices as much as income e.g. ocean waterfront homes!
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