Is US real estate a currency that is about to be revalued?

[blazespinnaker]

Given the danger to the USD, I was wondering if RE would be a good hedge against inflation.

However, I wonder - has inflows into the US economy propped up the US RE market in the same way the US dollar has been propped up?

Is US RE in a similar vulnerable place that the USD is?

[EJ]

You're seeing the start of the Global Margin Call on Real Estate.

A falling dollar is a leading indicator of a declining RE market; as inventories rise, even before prices decline, foreign lenders anticipate declining real estate prices resulting from rising interest rates that will arise from a weaker dollar and rising inflation.

[jk]

most residential real estate will be in trouble. buyers have been leveraging themselves to their eyeballs with interest-only negative-amortization, et, etc. i think high end commercial and resort/vacation properties may hold up. waterfront property on matha's vineyard or in the hamptons for example, will probably hold up fairly well. people from abroad with stronger currencies will hold up the market in that kind of area.

you'd think real estate as a real asset would be a good inflation hedge, but i think the property market is too dependent on leverage and the general health of the economy. it is also illiquid, of course.

i'm very attached to my home and plan to be in it quite a while longer, so i'm not too concerned about how its value changes. i locked in a 30 year fixed mortgage at 4.875% a few years ago, so that's ok too. but i'm too worried about the economy to have investment properties. [but i tend to a pessiistic outlook, frankly.]

[SeanO]

I think RE is a good hedge against inflation, just not right now. While historically RE has risen at about the rate of inflation, the unprecendented increases over the last 8 years will require about a 50% inflation adjusted decline to revert to the mean. Given the high rates of inflation predicted by KaPoom theory, we may only see slight declines in nominal prices to reach that level over the next 5-10 years.