Future Housing prices

Real mortgage interest rates are high and rising in the US, because the the future value of the US dollar is uncertain.  Lenders fear the possibility of very high inflation, so demand high interest rates.  This makes it difficult to buy a house.  At the same time, borrowers fear deflation.   They fear they could put down a deposit, then be wiped out as the value of house falls, along with their job that previously enabled them to pay the mortgage.  Both may well be right, for uncertainty over the future value of money results in uncertainty over the present value of money, resulting in stagflation.  Dollars and houses could fall relative to gold, food and fuel, and fall far, wiping out both lenders and borrowers.

We may therefore expect the proportion of people who own their own homes to fall, resulting in hostility to capitalism and enthusiasm for socialism, for people who do not own stuff tend to hate people who do own stuff, and lash out to harm them, not understanding that in so doing they harm themselves.

Ordinarily, the crisis would surely mean low home prices, which would be a good thing for the strength of  the people, for the core of society is young married people planning to have children, or having children, and without such people, everyone loses hope and confidence, people despair of the future, and despair of their way of life. But as government becomes every more pervasive, and claims ever greater authority, makes ever more decisions for us, it has become harder and harder to subdivide land.  So subdivisions have fallen far behind population growth.   We have an ever more severe shortage of subdivided land, which put ever greater upward pressure on housing prices.

We need prices to fall to a level where young couples can buy houses preparatory to having children, but this seems unlikely.   Despite the crisis, despite massive foreclosures, despite high interest rates on mortgages, despite massive falls in the price of housing, houses are still absurdly expensive, and are probably close to bottom.

I sadly regret to report that I think housing right now is a very good investment, the only better investment being subdivided land with secure building approval.

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