Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
A recent post asked about estimating the future value of real estate. It made me think of what I've noticed recently.
How can you determine the value of real estate in the future without knowing the value of the dollar.
At present, it seems like the printing presses are running overtime to print money. What does this do to actual value of RE?
I'm in Cancun at present, 3rd time since 10-09. Each time in the last 3 months, dollar is reciving less in pesos than before. Down about 10% in last few months .
If the RE went up 10% in dollar value, but our dollar loses 10% against other currencies, did we gain anything?
As an owner of a lot of diverse real estate, some with financing, it is a concern to me that our printing presses are running crazy and the spending or give away of the newly printed dollars cause concern. Just curious. If China stops investing and buying our dollars, what will our currency be worth and what changes will that cause in our inflated real estate? Rich
True - and funny how nobody really seemed to expect that. When the recession hit, the REI world was saying it would be a huge boon to landlords, since all those foreclosed homeowners would now become renters. Nobody counted on all the people economizing by moving back home or finding roomates and housemates, related or not.
Hi, that's the forumal Rich, the present value of a dollar. What the dollar will be worth is another matter. If demand is high in an area for a certian property the price will be high. If the value of the dollar is devalued, it's going to take even more dollars to acquire the use of that property, to it's level of demand.
Rich, you and I are old enough to remember a loaf of bread was a nickle. That McDonnalds dollar burger was fifteen cents and it was bigger! You remember the 80s, what did we do when rates went through the roof? Bought and sold with installment contracts! Get those balances down as fast as you can. Bill
Problem is I dont think your average American realizes this, unless you travel abroad, or buy/trade/deal with over seas companies, this doesnt affect you directly, even though it does in the big picture, I still have a dollar in my wallet and its no different then the dollar I had last week, last month, even last year. I think Real Estate prices are more known to people, alot more people see there dollar go down as there house price decreses, dollar might not go down, but something they paid $100k for is worth $80k today, there dollar went down, but dont realize what there dollar is worth outside of this country. Think alot of people would be very supprised, but I also think it'd have to decrease ALOT for most Americans to realize or worry about it, yes I've heard on money shows like hard money or some msnbc shows that the dollar is down, but doesnt mean much to the average American.
-Scott
Supply, demand, local economy and access to financing are all going to trump the value of the dollar when it comes to real estate valuation. It is too local in nature. Economic growth or decline at a local level cares little about international currency trading levels.
More important, I think, is that somewhere down the road we need to see a return to the correlation, at least on a national level, of inflation to real estate apreciation that went out of whack early in the last decade.
IMO, real estate values will remain location, location, location.
The dollar is going down, has been going down, and will continue to go down. Statistics about inflation, unemployment, etc are manipulated (reported artificially low) like crazy (as are gold and oil prices) so people don't panic and pull their $ out of the stock market and stop buying crap they don't need.
Do you really think a dollar today is the same as it was yesterday, or last year? What did you pay for a gallon of milk, a length of copper plumbing pipe, a roll of electrical wire, or a box of ammunition last year, or a few years ago? Computers and t-shirts might be cheap at BJ's, but the stuff that really matters is going up like a Himalayan mountain.
If you believe the dollar is losing value and will continue to do so, what can you do? Suprisingly, one of the best moves you can make is to get into as much debt as possible - as long as it's good debt.
Good debt - Buy income producing property at today's low fixed rates, then let your tenants pay off your mortgages with the devalued dollars of the future....
Yeah, I'm being basically doom and gloom but with some basic financial education and keeping your eyes and mind open there is still much success to be made no matter what happens to the U.S. of A and its economy. Just don't be a sheep with CNN as your source of reality :-)
Fox is my source of info. I only watch cnn when I'm stuck at airports that show it.
I like the ideas espoused above with one caveat.
1. Have 1 entity with all free and clear RE. Protect your butt COMPLETELY from all liability.
2. Have 1 entity with all properties managed to the hilot(owner financing). This entity is getting paid off with cheap dollars, but you're paying the mortgage payments with cheaper payments each year, due to the worthless value of them,imo. Rich , on the beach in Cancun
As an owner of a lot of diverse real estate, some with financing, it is a concern to me that our printing presses are running crazy and the spending or give away of the newly printed dollars cause concern. Just curious. If China stops investing and buying our dollars, what will our currency be worth and what changes will that cause in our inflated real estate? Rich
My take is that real properties will continue to be worth more and more US dollars (with the all-real-estate-is-local caveat thrown in of course), since the materials that make them up and the labor that builds them will just cost more and more dollars. People have to live somewhere, and if they can't afford to build new, they'll have to buy used or rent. Wish I knew what would happen to land values!
But if gas goes to $4, $5 a gallon or more in the future, I'd see people clustering more near the cities to avoid costly commutes - driving those land and rent prices further up.
In some areas, I'm seeing vacancies occur due to multiple families or generations moving in together to save costs. It has nothing to do with const costs or price of gas, just economy overall. Rich
True - and funny how nobody really seemed to expect that. When the recession hit, the REI world was saying it would be a huge boon to landlords, since all those foreclosed homeowners would now become renters. Nobody counted on all the people economizing by moving back home or finding roomates and housemates, related or not.