RFI: Correlation between declining dollar (or insert currency of choice) and rising property values?

YEAH, MY CONDO IS WORTH A FUCKLOT OF MONEY AND I'M BROKE!!!

yeah, but, um, a declining dollar doesn't necessarily mean you're broke, unless you only buy imports.

are you paying off a condo in Italy, JaXon?

I GOT HOES IN ALL AREA CODES!!

also, i only speak for me, not the declining dollar

I've read a bit on rising property values, but I have seen nothing suggesting a correlation with the declining dollar. I'm not an economist, but I don't think there is a strong correlation. Property value increases seem to be driven by low interest rates and a string of speculative/investment buying. Property values are increasing elsewhere in the world (UK, Australia) at a similar rate to the US, so I don't think it's tied to the currency.

If anything, in the CURRENT context, people outside the U.S. might be buying property because of the cheap U.S. dollar...(I stress "might".. I have no firsthand knowledge of this trend, or even if it exists.. just brainstorming.)

that is property in the U.S., which I assume gygax is talking about, when fixing a currency of choice like the U.S. dollar.

As devil's advocate, let's just say that the dollar continues to underperform to X foreign currency and property values did NOT inflate at a comparitive rate: US property would be much more attractive for X's foreign investment?

From what I can speculate, this bubble in US property values has given property owners an illusion of consumer confidence despite a lackluster economy/job market.

If the Feds hadn't cut interest rates to all-time lows and pressured banks to offer no-interest mortgage loans, could you imagine the affect on the economy? When was the last significant real-estate crash in the US?

A quick google:

"The whole "prosperity" of the past four years has been built almost exclusively on very low interest rates. In fact, real interest rates in the US may well be negative now. If interest rates rise significantly, the entire foundation of the US economy is undermined. Consumers are already overstretched; the US savings rate is supposedly a measly 1.5%, but may in fact be negative. Outstanding consumer debt is greater than GDP. As consumers face rising interest rates, they will have to cut consumption, since they can't easily cut their interest payments on mortgages, home equity loans, and credit card debt. The Bush "recovery" was the result almost wholly of consumer spending. If consumer spending falls, the recovery must falter.

Higher interest rates will have a direct impact on two pillars of the US economy -- new home construction and property values. The recovery was fueled largely by new home construction. With higher interest rates, new housing starts will fall. At the same time, US consumers have relied heavily on rising property values to allow them to convert equity to current consumption through mortgage refinancing and home equity loans. As interest rates rise, property values will stop rising, and at some point begin to decline. Because their house represents most Americans chief financial asset, the average American will watch their net worth level off and then fall."

"Consumers continue to feel wealthydue to ever-rising property values. They are taking money out of their appreciatinghousing assets by refinancing at very low interest rates. However, there has been adecided slowing to consumer spending in the past quarter. The amount of debt has begun to trouble households with the uncertainties in the slow economy. We feel that the fear level relating to the economy will have to decline substantially for consumer spending to once again rise. This could have a dampening effect on the economy making the recovery slower than expected."

Well, that's the problem. It's REALLY hard to predict what any single currency will do, especially today... so even that seemingly mild assumption is quite brave.

Not that I disagree with the bleak commentaries about the current U.S. economy, nor do I discount the bleaker future.

(Let's put it this way.. I may never buy property in the U.S. in my lifetime ever.)

"I’ll be the first to concede that the US economy has been more resilient than I had expected in this post-bubble era. So far, all we have seen is the mildest and shortest recession on record -- a surprisingly benign outcome given the seemingly lethal combination of rising unemployment and a sharply negative equity wealth effect. Ever-rising property values -- and the ability of households to extract purchasing power from these inflated assets -- appear to be one of the key missing pieces of this puzzle. Can this asset-driven growth dynamic be sustained?

The short answer is, I doubt it. Three key reasons come to mind: First, the housing cycle is extended and increasingly vulnerable to a downturn. Second, the American consumer must now face up to the legacy of an asset-driven consumption binge -- a debt overhang with a painful workout. A third consideration could prove most vexing. The Federal Reserve is doing everything in its power to forestall the endgame. Monetary policy is being aimed increasingly at prolonging the housing cycle -- a strategy that runs a growing risk of adding yet another bubble to the Fed’s recent track record. To me, all this paints a picture of an increasingly slippery slope for an already precarious US economy."

Thing is.. similar economic commentaries in other countries aren't exactly that much rosier, if at all.

..and THAT's the quagmire.

Rasheed Wallace to thread.