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To: carl a. mehr who wrote (172871)	2/7/2003 8:26:27 AM
From: Amy J	Respond to of 186894

Carl, RE: "fully expect a rip roaring bout of inflation. Real estate rates of 14% may happen again. It is good to owe little on RE. Thanks for the warning...humble carl " On this point (that inflation will return) we probably agree. I think Bush's spending spree will have to be paid through inflation. How else? New bond holders could be hurt. But if inflation is indeed used to feed the deficit, having a fixed loan mortgage sounds like a good idea: it's like buying a call option - leveraged increase. But you couldn't pay me to carry a RE loan, like the banks are paying people in Japan to do (because few want them.) When interest rates rise, RE$ eases because someone that earns (this example is from the SI RE Thread) $52k/yr and buys $300k RE can no longer afford to, so RE eases as less can afford it. In the 70's inflation, I wonder if RE dropped initially when interest rates initially rose, with RE$ inflecting back up as inflation went into full gear? (I'm asking, I was too small to know) Regards, Amy J