Well Demand Is High And Supply Is Low And The Dollar Is Weak

Category: Finance, Real Estate.

There has been a convergence of market conditions that point to a buying opportunity.

Second, the real estate market has turned into a buyer s market with the inventory levels of homes rising. First, interest rates are at an all time low which means you can lock in that mortgage rate at historic lows. Third, the dollar is weak internationally and real estate prices over the long term are subject to the effects of inflation. In the short term US housing values are more a function of local supply and demand, but over the long term other less apparent factors could eventually work their way into US housing values and costs. The US dollar has declined against the Eurodollar for the past five years. If you are an avid traveler of Europe, then you should have an appreciation of what I am talking about.

If you sell your home today for double what you paid for it ten years ago( in US dollars) and then take those dollars to Europe, how much appreciation in terms of" true value" did you obtain? If your dollar is worth half of what it was worth five or six years ago overseas, than what is your home really worth today. What affect will the weakening US dollar have on US housing prices? Consider the price of oil, and other commodities, gold including the cost of building materials for a home. Will this put upward pressure on the US housing market over time? If gold is$ 1000 an ounce and the dollar has depreciated by 50% against most major foreign currencies, then gold s appreciation from$ 400 to$ 1000 an ounce is more a function of the depreciating dollar rather than a true increase in the price of gold. If oil has risen from a price of$ 15 a barrel 10 years ago to a price of$ 105 a barrel today, then what amount of that dollar increase is a result of the depreciation of our own currency( the US dollar) .

This holds true for oil as well. Oil and gold are" international currencies" and many of the building materials we use in our homes are affected by long term changes in exchange rates. Housing prices have more than doubled in most regions, but construction costs have risen as well. What does this mean for housing prices today and in the future and what does this mean for the cost of construction now and in the future? In many instances material costs have doubled and even tripled, so it may cost twice as much to build that house as compared to what it might have costs ten years ago. Why?

If the median and average selling price of a home continues to decline, then construction of new homes will fall dramatically. Because rising construction costs and falling housing prices will squeeze builder s gross profit margins forcing them to postpone many future projects. While real estate prices are failing in most local US real estate markets, New York City prices continue to rise. The New York City real estate market is the most likely real estate market to be impacted by the falling dollar, because of its appeal to international investors. Why? Foreign investors are hungry for Manhattan real estate and much of the added supply of new construction is swallowed up by foreign investors.

Well demand is high and supply is low and the dollar is weak. Please note this article was written for information purposes only and should not be relied on to make material financial decisions. Please see RealEstate- Calc. com for real estate investment analysis and mortgage calculators for mortgage analysis. Speak to your lawyer, financial advisor and your tax specialist for professional advice in purchasing a home.