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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: koan who wrote (77771)	4/16/2008 12:09:33 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

I have to disagree with your comment and I suspect you will as well after you think about it. If we start running 10% (or high) inflation, I would expect housing prices to float up with inflation sooner or later. I am not sure if anyone will be able to buy them because of higher interest rates, . . . Home prices do not exist apart from actual recorded sales prices. Home prices are actual recorded sales prices, not "asking prices". Homes and commercial buildings, as well as stocks, and commodities often sell far below replacement cost for long periods of time. After an extended credit-bubble induced building boom we are faced with a massive glut of housing. This will take a very long time to work off. When someone says current prices don't reflect "real prices" because they are mostly "foreclosures being sold by banks" or simply "people who have to sell" they are reflecting their own imaginary market rather than the actual market of supply and demand. .

To: koan who wrote (77771)	4/16/2008 12:37:12 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

If we start running 10% (or high) inflation, I would expect housing prices to float up with inflation sooner or later. Exactly how are people going to afford them? They can't afford them now. More people are going to be thrown out of work. There will be still more foreclosures and more housing inventory. Sooner or later may be 4 years from now, or 10. In the meantime houses will keep falling until they are affordable. All these inflation theories die on the vine with global wage arbitrage, outsourcing of jobs, and now a recession with declining jobs. Pray tell how are people going to afford to buy houses. Remember that lending standards have tightened and down payments are required. There are no subprime loans or no-doc loans now. Mish

To: koan who wrote (77771)	4/16/2008 2:02:24 PM
From: rudyt	Read Replies (2) \| Respond to of 116555

Inflation(money supply rise) has been running at 10% for at least the last 10 years straight.While in general prices rise,what accually happens is this funny money finds its way into speculative area's.Tech stocks in the late 90's(bust),real estate up until now(bust).The money creating is continuing so now we have to figure out where the next mal-investment will be.Precious metals,commodities looks like the best bet for the next explosion. So I figure this inflation should underpin stock markets and real estate in nominal terms but in gold terms they will take a beating.

To: koan who wrote (77771)	4/16/2008 2:26:40 PM
From: benwood	Read Replies (2) \| Respond to of 116555

"If we start running 10% (or high) inflation, I would expect housing prices to float up with inflation sooner or later..." If and only if wages rise. There will be a long lag before COLAs return, and so as the buying power of the average American will continue to decline rapidly in real terms for a minimum of another year to two years. As a result, housing prices will have to adjust downward. Increases in taxes and/or interest rates will put additional downward pressure on housing prices, possibly significantly. And continued rapid rise in energy and/or food will pressure housing prices. The irony of the Feds doing all they can to inflate is that the symptom, retail inflation, will ravage household cash flow and so make the mortgage payment more difficult, not less. Because of contracts, my company won't have any semblance of a cost of living raise for at least 18 months, which means my salary will decline another 10-15% prior to what optimistically will be a raise of 1/2 the going inflation rate. Retail inflation persisting at the current 11-12% rate for another 30 months means my salary will be down approximately 20% in real terms from today. And today is already down 5% from last year. My situation is hardly unique.